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By: Brendan Gilmartin, VP Research & Content

Overview
FedEx (NYSE:FDX) is scheduled to report 4Q 2013 earnings before the bell on Wednesday, June 19. The results are typically disseminated at 7:30 a.m. EST and will follow with a conference call at 8:30 a.m. Results from FedEx are widely seen as a proxy for economic growth and tend to heavily influence the broader market gauges, including the equity index futures. Furthermore, the guidance for the balance of the full year could impact both the underlying shares and the broader market.

Outliers & Strategy

Key measures:

  • Earnings Per Share: FedEx announced in March that earnings for the 4Q period are expected to be in the range of $1.90 to $2.10 per share. The Street estimate is toward the low end of that range at $1.96. (Source: Yahoo! Finance).
  • Last month, FedEx disclosed that the impact of retiring aging aircraft, engines and parts resulted in an impairment charge of $100 million for the 4Q period. Since last March, the consensus earnings estimate has decreased from $2.12 to $1.96, a decline of 7.5%.
  • Adjusted/Earnings Per Share Guidance (1Q 2014): Note that FedEx tends to offer fairly conservative guidance. The current estimate is $1.59 for 1Q 2014.
  • Adjusted/Earnings Per Share Guidance (FY 2014): Keep a close eye on earnings guidance for 2014. The current estimate is $7.36. A range above or below this threshold will likely have direct consequences for the share price.

Recent News

  • 06/14: Goldman Sachs lowered its 4Q 2013 earnings estimate on FedEx from $2.17 to $1.95, according to a post on StreetInsider.com and cut the price target from $115 to $114. The firm noted that global airfreight has been mixed.
  • 06/13: FedEx released plans to accelerate the retirement of 86 aircraft and 308 related engines in an effort to modernize its fleet. The impact will result in an impairment charge of $100 million recorded in May 2013.
  • 06/10: FedEx Freight said it will increase shipping rates by an average of 4.5%, effective July 1, 2013.
  • 06/04: Bank of America raised its price target on FedEx from $115 to $120, according to a post on Benzinga.com, thanks to recent fleet upgrades and decommissioning of aging aircraft in order to bolster profits.
  • 04/24: FedEx announced a 7-Year $10.5 bln contract with the United States Postal Service to provide airport-to-airport transportation of USPS Express Mail and Priority Mail.

Technical Review

FedEx shares have been meandering in a fairly narrow range over the past several weeks, despite the broader market volatility. Should results fail to meet the Street's tempered expectations, look for initial support near the 50-Day SMA at $96.00, with further downside risk to $94.00. Conversely, there is initial resistance at the $100-level, followed by 4102 in the event that earnings surprise to the upside. (Chart courtesy of StockCharts.com)

(click to enlarge)

Summary

FedEx shares have meandered in a narrow range, despite evidence of an improving economic backdrop in North American and signs global markets are strengthening. At 13.4x forward earnings, FedEx is also trading at a discount to rival United Parcel Service (NYSE:UPS) at 15.2x, while recent price hikes are seen bolstering margins heading into 2014. FedEx is also seen benefiting from restructuring efforts announced last October, upgrades to its fleet, and a recent multi-billion agreement with the United States Postal Service. As usual, much of the focus will center on the outlook for the 4Q period and balance of fiscal 2013.

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Source: FedEx Meandering In A Narrow Range Ahead Of 4Q Earnings; Key Catalyst Will Be 2014 Guidance