FedEx Corporation, a global leader in package delivery and logistics services, is anticipated to report its fiscal first-quarter results this month, with projections indicating outcomes that fall short of analysts' consensus estimates. According to insights provided by Morgan Stanley on Tuesday, the company's adjusted earnings per share (EPS) are expected to be approximately $4.69.
This figure is about 6% lower than the Wall Street estimate of $4.98. Morgan Stanley's analysis points to anticipated earnings before interest and taxes (EBIT) for FedEx, projected at 4% below consensus figures. This decline is attributed to a notable weakness in both the express and ground operations segments.
However, some positive offset is expected from an anticipated stronger performance in freight, reflecting variances in market conditions. Scheduled for disclosure on September 19, FedEx's upcoming quarterly earnings report is particularly significant, as it could set the tone for the company's financial trajectory in the near term.
The brokerage has estimated EBIT in the express segment to be around $252 million, which also falls short of the consensus forecast of $261 million. This underperformance is partly due to revenue and margin pressures that were softer than initially expected. Morgan Stanley also posits that the express segment's revenue is likely to remain flat year-over-year, contrasting with market expectations of modest growth. In a detailed commentary, Morgan Stanley noted, "We see little signs of acceleration in the macro backdrop, which has been a headwind to results in recent quarters, with key macro datapoints lingering at fairly tepid levels." The analysis reinforced an equal weight rating on FedEx's stock, setting a $215 price target, which reflects cautious positioning amid uncertain market dynamics. Furthermore, in terms of ground operations, Morgan Stanley has projected an EBIT estimate of $1.02 billion, which is 2% lower than the consensus.
The prediction of flat ground revenue mirrors a similar sentiment, signifying a sequential deceleration, compounded by more challenging metrics and one fewer working day in the commercial segment compared to previous quarters. In the freight segment, Morgan Stanley brings a slightly more optimistic outlook, projecting an EBIT of $523 million, which is 5% above consensus expectations.
This anticipated 'execution-driven beat' is said to reflect ongoing initiatives aimed at improving revenue quality within the freight division. Despite that, tonnage trends among less-than-truckload peers show mixed signals, and Morgan Stanley cautions that such dynamics may become increasingly challenging as the trucking industry adjusts from the fallout related to Yellow's bankruptcy last year. Looking further ahead, Morgan Stanley's adjusted EPS target for FedEx stands at $15.84 for the full fiscal year, which is significantly beneath consensus forecasts as well as the company's guidance of $20 to $22.
Analysts surveyed via Capital IQ are modeling for normalized EPS of $21.10 for fiscal 2025. At this juncture, it appears that the stock’s performance for the current quarter is poised to rely heavily on insights provided during management's guidance. The outlook for the second quarter is further clouded by the implications of Cyber Monday being pushed into the third quarter, alongside forecasts of a more compressed peak season and the end of the U.S.
Postal Service contract due at the end of September. Nevertheless, Cyber Monday is expected to positively impact the results in the upcoming third quarter. Finally, FedEx is also contending with tougher year-over-year comparisons that are tied to its DRIVE cost-savings initiative. These elements, alongside other operational factors, could contribute to considerable earnings volatility, relative to both projections and expectations set forth by analysts, as highlighted by Morgan Stanley's analysis. Price: 293.17, Change: -5.60, Percent Change: -1.87 $FDX.