FedEx to Signal Economy Trends

FedEx is set to report its final quarterly results for the fiscal year at a time of economic uncertainty, with investors looking for signs that the package delivery company managed to maintain solid freight revenue growth during this period as fears mount that economic activity may be losing momentum.​

Hoping for Another Strong Performance

In the previous quarter (FedEx' fiscal fourth quarter), the company's share price increased following better-than-expected results driven by faster growth in ground freight revenue and initial benefits from its cost reduction programme. This sets a high bar for its Q1 earnings results, which are expected to be announced after the stock market closes on Thursday. Analysts forecast a sequential decline in the company's performance, with implied volatility of around 8% in either direction. Investors are weighing the potential negative impact of slower consumer demand affecting parcel shipments against the company's ongoing efforts to cut costs.

FedEx is expected to report EPS of $4.80, lower than the prior quarter's $5.41 but above the $4.55 reported in the equivalent quarter last year. Sales are anticipated to decrease quarter-on-quarter (QOQ) but rise year-on-year (YOY) to $22.0 billion, up from $21.7 billion a year ago. At the start of the fiscal year, FedEx provided full-year guidance expected to be reaffirmed, projecting EPS between $18.25 to $20.25, which implies an improvement driven by internal efficiencies, as the bottom line is forecast to grow 6-18% while sales increase by around 2%.​

Focus on the Economic Outlook

As one of the leading parcel carriers, FedEx often accurately assesses consumer demand trends. However, investors may be cautious following Amazon's weaker-than-expected recent earnings results and outlook as it provided weak guidance for the third quarter, suggesting FedEx made fewer shipments in the last three months. Previously, FedEx had forecast moderate demand growth throughout the year.

For FedEx specifically, investors might be interested in executive comments on the potential impact of the end of the contract with the US Postal Service at the end of September. While FedEx has portrayed this change positively, focusing on efficiency gains, more detailed analysis may emerge as the deadline nears. Investors will also monitor the ongoing effects of FedEx's $4 billion cost-cutting programme, which began in 2020 and is planned to finish in 2025. In the last quarter, FedEx increased its expected savings from it.

FedEx Leaves Behind Pennant

FedEx's share price has the potential to rise further if it can sustain recent gains. A pennant observed suggests the stock could reach $335 per share based on the measured-move projection if it first surpasses the current all-time high of $315. Alternatively, if the share price moves lower and closes below $275 through $285, the chances of the current upward trend reversing increase, and the stock may decline towards $260.

Source: SpreadEx / FEDEX

Key Takeaways

FedEx is set to report its quarterly results amid economic uncertainty, with investors looking for signs that the company maintained freight revenue growth and managed costs effectively. In the previous quarter, FedEx saw share price gains due to stronger-than-expected results from ground freight and cost reductions. However, analysts now forecast a sequential decline due to concerns around slowing consumer demand. Investors will be focused on FedEx's assessment of economic trends and the progress of its $4 billion cost-cutting programme.​