FedEx Corporation (FDX) announced earnings results for the first quarter of its fiscal year 2013 on Tuesday, September 18. The company accounts for 2.0 percent of the S&P 500's Industrial sector and 12.5 percent of the Transportation and Logistics sub-sector and as such provides some indication of the U.S. market's future industrial production growth.
The company gave its projections for future economic growth both domestically and internationally. The company's outlook predicted 2012 U.S. GDP growth of 2.2 percent, unchanged from its previous outlook, and 2013 U.S. GDP growth of 1.9 percent, down 0.5 percentage points from the previous quarter's outlook. Estimates for world GDP growth were 2.3 percent in 2012 and 2.7 percent for 2013.
Its 2013 U.S. GDP expectations are slightly below the Federal Reserve's projections which state a range of 2.3 to 3.5 percent GDP growth for 2013.
FedEx also included estimates for industrial production, reporting it expected growth of 4.2 percent for calendar year 2012 and 3.0 percent for 2013, revised downward 0.1 percent and 0.5 percent, respectively, from its previous quarterly announcement.
The company's projections and first quarter earnings announcement dampened the outlook slightly on U.S. economic growth following the Federal Reserve's new actions for quantitative easing.
FedEx reported Q1 2013 earnings of $459 million resulting in diluted EPS of $1.45. First quarter earnings were 1.1 percent below one year ago and 16.6 percent below the previous quarter. EPS, however, was consistent with the quarter's estimate of $1.45 to $1.60 per diluted share.
Second quarter estimates appear to be primarily focused on the company's previous growth which has been contracting domestically and internationally. It estimated Q2 diluted EPS of $1.30 to $1.45 and reduced its fiscal year 2013 earnings estimate from $6.90 to $7.40 per diluted share to $6.20 to $6.60 per diluted share.
Given FedEx's weak outlook and heavy dependence on global economies the stock appears to provide a short sell opportunity. The stock fell 3.99 percent following the announcement compared to a 0.45 percent decline in the Industrial sector.
The company's near term outlook appears to be based primarily on continuation of business results seen in the previous quarters and provides a more negative outlook for potential growth in domestic production than current market sentiment following the Federal Reserve's new monetary policy actions. Although the company's outlook and earnings growth estimates suggest the effects of QE3 may not cause the improvements that many speculators predict, the shipping company's expansive global business makes it difficult to interpret domestic versus international trends that may be emerging in industrial production.