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FedEx (FDX) - Industrials - Air Freight & Logistics | Reports December 16, before market open
Key Takeaways
- A not so happy holiday season will lead to late deliveries, again
- $1.6 billion capex into fastest growing segment: FedEx Ground
- Energy sector has been falling, fuel prices are low, but FedEx shares are still tumbling
- What are you expecting for FDX? Get your estimate in here!
FedEx, a global courier delivery service, is set to report fiscal 2Q2016 earnings Wednesday morning. Historically, the holiday season has been everything but positive for the Memphis, TN based company. High volumes, not enough workers, and UPS dominance in the market usually cooks up below-average earnings reports for FedEx. This holiday season, Wall Street analysts are expecting to see year-over-year increases in both revenue and EPS, however, FedEx has missed earnings forecasts in three of the last four quarters. The Estimize consensus calls for EPS of $2.55 and revenue of $12.45 billion. Wall Street analysts are predicting EPS to come in two cents lower and revenue of $12.4 billion.
The holiday season tends to be one of the busiest shopping times of the year. With a rise in e-commerce sales, both FedEx and UPS have had to hire additional workers to alleviate delivery pressure, but to no avail. FedEx nonpeak on-time deliveries fell below its average of 95% while UPS’ dipped to 91%. Last year, several thousands of customers complained to FedEx because of shipments arriving after Christmas day. FedEx expects to deliver around 317 million packages between Black Friday and Christmas Eve. However, FedEx has taken action to set itself up for growth and profit to offset any losses that could be incurred this season.
Arguably one of their most important initiatives, the shipping company has declared that it will not accept more packages than it can take. It’s simple, smart, and ultimately could save lost revenues down the line. Another step they are taking is to invest $1.6 billion in 2016 in their largest growing segment: FedEx ground. With more trucks and drivers on the road, FedEx could potentially avoid late deliveries for the next holiday time frame.
A huge expense for any courier delivery company is fuel. With recent declines in crude oil, fuel prices have been dipping to low points not seen since 2008. Lower fuel costs look like a bag of money to air and freight logistics companies, but in FedEx’s case, share prices have tumbled 15% on the year due to a loss of fuel surcharges. Revenues will be negatively affected as FedEx has not shown enough growth on the earnings front to outweigh losses in revenue.
Overseas, FedEx was fined $18.5 million (17 million Euros) in France for increasing price fixes on parcels for a duration of six years. Nineteen other companies were fined as well, but France’s antitrust defenders claimed several companies met together to discuss price increases between 2004-2010.
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