Shares of FedEx (FDX - Free Report) have not only significantly lagged the market in 2019 but have also fallen well behind rival United Parcel Service (UPS - Free Report) . Wall Street and investors are also likely still trying to wrap their heads around why FedEx announced in August that it was essentially ending its relationship with Amazon (AMZN - Free Report) .
Now let’s see what to expect from the firm’s upcoming first-quarter fiscal 2020 financial results, due out after the closing bell on Tuesday, September 17, to see if FDX stock might bounce back.
The global shipping giant shocked many last month when it said it would not renew its ground shipping contract with Amazon. FedEx no longer ships goods for the e-commerce powerhouse through the air or the ground, after it announced in June that it ended its air-shipping relationship with Amazon. Some might contend that FedEx pulled the cord too early. Yet clearly management didn’t want to be in business with a company that has its sights set on taking over the global shipping and logistics market.
FedEx is still massive and boasts a fleet of 681 planes that it either owns or leases, compared to United Parcel Service’s 564 and Amazon’s 60, according to the Wall Street journal—along with a massive ground fleet. The Memphis, Tennessee-based firm has also been able to do what Microsoft (MSFT - Free Report) has done with cloud computing: attract Amazon’s direct rivals.
FedEx hopes to become the home of Walmart (WMT - Free Report) , Target (TGT - Free Report) , and everyone else trying to fend off the Seattle giant’s encroachment. The company also wants to improve its FedEx Express hub automation, modernize its FedEx Express air fleet, and much more going forward.
With that said, investors have clearly not bought into much of anything FDX has done over the past several years, particularly in the last 12 months. Shares of FedEx have slipped 19% over the last two years and 31% in the trailing 52 weeks. What must be more frustrating for FedEx is the fact that its downturn has come amid climbing revenues. In fact, fiscal 2019 sales climbed 6.5%, with 2018 up 8.5% and 2017 up a whopping 20%.
Q1 2020 Outlook & Beyond
Looking ahead, our current Zacks Consensus Estimate calls for FDX’s Q1 fiscal 2020 sales to climb just 0.50% to reach $17.14 billion. Meanwhile, full-year 2020 sales are projected to pop 2% to reach $71.08 billion. Peeking even further down the road, FedEx’s 2021 revenue is expected to come in 4.4% higher than our current-year estimate to hit $74.22 billion.
At the bottom end of the income statement, FedEx’s 2020 outlook appears far worse. The company’s first-quarter earnings are projected to fall 7.5% to hit $3.20 per share, with its full-year 2020 EPS figure projected to slip 5.3%. Luckily for investors, the shipping firm’s 2021 earnings are expected to climb 10.5% above our 2020 estimate to easily top 2019.
FedEx is currently a Zacks Rank #3 (Hold) that does hold a “B” grade for Value and an “A” for Growth in our Style Scores system. The firm also pays an annualized dividend of $2.60 per share at the moment, with a 1.51% yield. This looks solid compared to the 10-year U.S. Treasury note. But we should remember that this is somewhat artificially inflated based on its falling stock price.
Beaten-down FedEx could bounce back on blowout quarterly results or upbeat guidance. But investors should likely hold off on scooping up any FDX shares until after Tuesday’s release, unless they can deal with the risk of a possible sell-off.
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