FedEx Corporation (NYSE: FDX) has reported the adjusted earnings per share of $2.35 in the third quarter of 2017, missing the analysts’ estimates for the adjusted earnings per share of $2.62 by $0.27. The company had reported the adjusted revenue growth of 18.1 percent to $15 billion in the third quarter of 2017, which is as per the analysts’ estimates for revenue of $15 billion. The company has reported the net income for its fiscal third quarter ending February 28th of $562 million up from $507 million a year earlier.
Moreover, FDX’s Express Segment revenue grew 3% from last year, due to the higher rates and volumes. Its FedEx Ground Segment also saw solid gains, due to the higher base rates and commercial volume growth leading the way, although residential volume lagged. Finally, the company’s FedEx Freight Segment revenue grew on better rates and higher fuel surcharges, while average daily shipments were flat.
However, FDX has been grappling with lower margins on its ecommerce business, as deliveries to individual homes are typically more expensive than deliveries to businesses that often get several packages at once. FDX has also faced increased competition from Amazon, which has expanded into the delivery business but Amazon rely heavily for delivery. Therefore, FDX has dismissed Amazon’s competition view.
In the third quarter, FDX has extended the 16-year Express Air transportation relationship with the U.S. Postal Service, and has added to the range of customer solutions with FedEx Fulfillment to benefit small and medium-sized businesses. The company has made an agreement with Walgreens to broaden convenient access to FedEx services.
Looking ahead, FDX has reaffirmed its 2017 earnings per share guidance, and expects the 2017 earnings per share in the range of $11.85 to $12.35, while the analysts are expecting the 2017 earnings per share of $11.93. FDX is expected to experience less volatility in earnings when fuel prices change rapidly due to the company’s new weekly versus monthly fuel charge adjustment system that was implemented last month. FDX has cut its capex outlook for the year to $5.3 billion from $5.6 billion, mainly due to lower planned FedEx Ground spending.
FedEx Corporation stock has risen 17.18% in the last one year (source: Google Finance). According to tipranks.com, 10 analysts has covered the stock while recommending a “Strong Buy”. FDX has an average price target of $219.10, which is a further upside of 14.21%.