FedEx to deliver a strong finish

FedEx will reveal its final-quarter numbers on 17 June, and the delivery company is expected to finish the year on a high note.

A stationary FedEx truck
Source: Bloomberg

FedEx coped well during the busy winter season, and the company saw earnings increase by 53% in the period from December to February. The weather wasn’t as harsh as expected, and the enormous drop in fuel costs brought down overheads. Revenue growth outstripped that of volumes as some rates were increased over the year. CEO Fred Smith described the peak season as ‘very successful’ across all divisions of the courier company.

The rise of ecommerce shipments is still growing and FedEx is capitalising on the business – operating income grew by 14% during the period. The ground delivery service in the US saw volumes rise by 4%, while the air parcel operation registered a 128% jump in operating income – the best performing unit by far.

FedEx foresees a record final quarter later this month, and since rival United Parcel Service issued a profit warning in January, the gap between the two companies is widening.

When FedEx announces its fourth-quarter figures, the market is anticipating revenue of $12.3 billion and EPS of $2.68. The third-quarter numbers were received well, with revenue coming in at $11.7 billion and EPS of $2.01 against market expectations of $11.78 billion and $1.87 respectively. The company will also announce its final-year figures on the same date, and dealers are expecting revenue of $47.69 and EPS of $8.94, which equate to a 4.5% rise in revenue and a 32% increase in EPS.

Equity analysts are very bullish on FedEx, and out of the 30 ratings, 17 are buys and 13 are holds. The average target price is $194.16, which is 8% above the current price. Investment banks are also bullish on  UPS, with 11 buys and 19 holds from 30 recommendations. The average target price is $109.64, which is 9% above the current price.

The number of short positions being taken out on FedEx has increased by 19% since the firm posted its third-quarter numbers in March.

FedEx’s share price is making another attempt on $180, and if that mark is taken out then the record-high of $183.52 will be in sight, followed by $184. If $180 isn’t taken out and the stock goes into retreat, support will be found at $177 then closely trailed by $174 should the aforementioned fail.

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