Wednesday, December 15, 2010

FedEx Corp. (NYSE: FDX): Q2 Earnings Preview 2011

FedEx Corp. (NYSE: FDX) is scheduled to release fiscal second quarter earnings on Thursday, December 16, 2010. Analysts, on average, expect the company to report earnings of $1.31 per share on revenue of $9.70 billion. In the year ago quarter, the company reported earnings of $1.10 per share on revenue of $8.60 billion.

FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. It operates in four segments: FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services. Shipping firms such as FedEx and rival United Parcel Service (NYSE: UPS) are often considered a bellwether for the U.S. economy because the strength of their businesses serves as a useful gauge of activity in the broader economy. 

In the preceding second quarter, the Memphis, Tennessee-based company's net income was $380 million, or $1.20 a share, compared to $181 million, or 58 cents a share, in the year-earlier quarter. Revenue climbed 18% to $9.46 billion. Analysts, on average, expected the company to report earnings of $1.20 per share on revenue of $9.41 billion. 

At its last earnings call in September, the company said that it anticipates second-quarter GAAP earnings to be in the range of $097 to $1.21 per share and non-GAAP earnings of $1.15 to $1.35 per share. The company also boosted its fiscal 2011 guidance. FedEx said that it now anticipates earnings to be $4.80 to $5.25 per share for fiscal 2011, up from the company's prior outlook of $4.60 to $5.20 per share. GAAP Earnings are expected to be $4.40 to $4.95 per share for fiscal 2011.

Further, FedEx said it will combine its FedEx Freight and FedEx National LTL operations effective January 30, 2011, aiming to increase efficiencies and reduce operational costs. The combination is expected to result in headcount reduction by about 1,700 full-time employees, and the company will close approximately 100 facilities.

FedEx announced recently that Monday, December 13, 2010 was the busiest day in the company's history as drivers hit the road to pick-up almost 16 million shipments around the world. This volume represents an increase of nearly 13 percent from last year's busiest day and is double the volume handled on an average day in the FedEx network. FedEx expects to move more than 223 million shipments in its global networks between Thanksgiving and Christmas--a year-over-year increase of 11 percent. During the week of December 13, also the busiest week of the year for FedEx, the company expects to move more than 63 million shipments compared to last year's busiest week of 57.5 million shipments. 

In December, the company said that it will raise shipping rates for its FedEx Ground and FedEx Home Delivery by a net average of 4.9% from January 3, 2011. 

Among other developments, the company recently agreed to acquire the logistics, distribution and express businesses of India-based AFL Pvt. Ltd. and its affiliate, Unifreight India Pvt. Ltd. FedEx expects the deal to close in its third fiscal quarter, which ends February 2011, subject to customary closing conditions.

FedEx is well positioned to benefit from improving freight demand and faster-than-expected economic recovery. It's margins are expected to improve economic health is a key determinant of package volumes. It is also poised to benefit from the turmoil at the U.S. Post Office as  reliability and efficiency concerns continue to come under scrutiny.

In terms of stock performance, FedEx shares are up nearly 17% since the beginning of the year.

Full Disclosure: None.
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