Back to top

Image: Bigstock

FedEx (FDX) Gets Mired in Headwinds: Discard Stock for Now

Read MoreHide Full Article

FedEx Corporation (FDX - Free Report) has been grappling with a global trade slowdown and weakness in the European economy for a while now. The company’s third-quarter fiscal 2019 results bears testimony to this dismal scenario.

It reported lower-than-expected earnings during the fiscal third quarter. Moreover, the bottom line declined 18.6% on a year-over-year basis due to a disappointing performance of the company’s major revenue generating segment, FedEx Express. Notably, this marks the company’s third straight quarter of an earnings miss.

Soft international revenues and a weak global trade are hampering the performance of FedEx Express segment. The company expects this situation to persist in the near future.

Moreover, the sluggish global trade compelled the company to trim its earnings per share outlook for fiscal 2019 for the second time during third-quarter fiscal 2019 earnings release. Previously, the company slashed its earnings forecast in December 2018.
 
FedEx now anticipates fiscal 2019 earnings per share in the range of $15.10-$15.90 excluding pension adjustments, TNT Express integration expenses and certain other items (prior view was in the $15.50-$16.60 range).

Apart from the above factors, high costs are hurting the company’s growth. With FedEx investing significantly in facility upgrades at its key divisions, capital expenses are on an upswing. Capital expenses are expected to be $5.6 billion for fiscal 2019. Additionally, integration expenses pertaining to TNT Express are pushing up costs. FedEx anticipates TNT Express integration charges to be more than $1.5 billion through fiscal 2021. Of these costs, approximately $435 million are estimated to be incurred in fiscal 2019.

The aforementioned adversities clearly substantiate the company’s Zacks Rank #4 (Sell). This bearish Zacks Rank makes it pretty clear that investors should discard the stock from their portfolio at the moment.

Moreover, the Zacks Consensus Estimate for the company’s current-quarter earnings has been revised nearly 7% downward in the last 60 days.

Notably, shares of the company have plunged more than 28% in the past six months, wider than the industry’s 15.8% decline.



 

Key Picks

A few better-ranked stocks in the broader Transportation sector are Atlas Air Worldwide Holdings , Radiant Logistics, Inc. (RLGT - Free Report) and Azul (AZUL - Free Report) . While Azul sports a Zacks Rank #1 (Strong Buy), Atlas Air Worldwide and Radiant Logistics carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Atlas Air Worldwide and Azul have rallied more than 10% each on a year-to-date basis. Meanwhile, the Radiant Logistics stock has surged more than 31% in the same time frame.

Is Your Investment Advisor Fumbling Your Financial Future?

See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.”

Click to get it free >>


Unique Zacks Analysis of Your Chosen Ticker


Pick one free report - opportunity may be withdrawn at any time


FedEx Corporation (FDX) - $25 value - yours FREE >>

Radiant Logistics, Inc. (RLGT) - $25 value - yours FREE >>

AZUL (AZUL) - $25 value - yours FREE >>

Published in