Shipping heavyweight FedEx surprised Wall Street Thursday, reporting better-than-expected fiscal 2024 third-quarter earnings while revenue came in below expectations. FedEx also narrowed its full-year earnings view, citing uncertainty about the economy. FDX surged Friday.
FedEx reported Thursday earnings of $3.86 per share, up 13% compared to Q3 2023, in the fiscal third quarter with revenue falling 2% to $21.74 billion. Analysts expected FedEx EPS of $3.43 with sales of $21.95 billion. Wall Street looks to FDX earnings performance and outlook to provide on-the-ground readings of economic activity.
FedEx blamed the 2% revenue decrease primarily on lower fuel surcharges at all its transportation segments along with decreased volumes in its FedEx Express and FedEx Freight segments.
Revenue from FedEx's package delivery business increased less than 1% to $8.26 billion. Meanwhile, sales from the company's freight segment dropped around 3% to $2.12 billion.
For the rest of the fiscal year, FedEx said it expects revenue to be "pressured by volatile macroeconomic conditions negatively affecting customer demand for our services and constraining yield growth."
FedEx maintained its full fiscal-year outlook of "low-single-digit percentage decline" in revenue and narrowed its earnings view to $17.25-$18.25 per share. In December 2023, FedEx predicted full 2024 earnings of $17-$18.50 per share.
FedEx added that it is currently in negotiations for a new multi-year contract agreement with the United Postal Service (USPS). The current contract expires at the end of September.
"The uncertainty of a slowdown in the global economy, global inflation, geopolitical challenges, and the effects these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for the remainder of 2024 inherently less certain," according to the FedEx 10-Q filing for the quarter.
FedEx Outlook And Stock Performance
FDX stock jumped 7.4% to 284.31 Friday during market action, approaching a 285.53 buy point. On Thursday, FedEx stock gained 1.9% to 264.85. Ahead of Friday trade, FedEx stock was up more than 6% in March, working to climb the right side of a three-month consolidation, according to MarketSurge analysis.
The earnings report from FedEx Thursday follows Hapag-Lloyd Chief Executive Rolf Habben Jansen telling CNBC recently that he has an improved view on trade for the rest of 2024. Germany-based Hapag-Lloyd is the world's fifth-largest ocean carrier.
Jansen is more optimistic on shipping demand throughout the year. U.S. shippers, including retailers, are planning for an earlier peak shipping season, around June, in 2024, according to CNBC.
Ahead of FedEx's fiscal third-quarter report Thursday, analysts expressed pessimism.
Stifel on Thursday lowered its price target on FedEx stock to 290, from 305, while maintaining a buy rating on the shares. The firm wrote that heading into the fiscal fourth quarter, it is "incrementally more cautious" on FedEx.
Morgan Stanley analyst Ravi Shanker wrote on March 4 the firm expected a Q3 earnings miss and that it is awaiting details on FedEx's contract with USPS.
Shanker wrote there is "risk" to fiscal year guidance and that even if FedEx management "maintains the range by pointing to a sharp 4Q recovery, we believe the market may be somewhat skeptical."
Meanwhile, rival UPS holds its "analyst day" on March 26. The package delivery giant at the end of January announced plans to reduce its workforce by 12,000 along with worse-than-expected fourth-quarter revenue and 2024 guidance well below analyst expectations.
UPS stock gained around 0.6% Friday.
Both FedEx and UPS have lost ground to Amazon.com in parcel deliveries in recent years. In 2022, Amazon delivered more packages in the U.S. than UPS. Amazon previously beat out in FedEx in 2020. The Wall Street Journal reported late in 2023 that the e-commerce giant is likely to widen delivery gap.
The USPS remains the largest parcel delivery service by volume.
FedEx stock has a 59 Composite Rating out of a best-possible 99. FDX shares also have a 61 Relative Strength Rating and an 83 EPS Rating.
Please follow Kit Norton on X, formerly known as Twitter, @KitNorton for more coverage.
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