Fedex Q3 EPS Guidance: Not Enough on the Table

Fedex (FDX) announced guidance for EPS for the quarter ending Aug 31 at $1.23. This is well above the last guidance. The reason being, cost cutting and an unexpected drop in fuel prices toward the end of the quarter. But it still has not yet budged on guidance for the year. In fact it points to worsening economic situations in both the US and overseas.

The shares pop in after market trading.

The press release does not parse out how much of the gain is attributable to improved fuel prices and what may be rightfully attributable to cost cutting. We can all comprehend fuel costs as a major factor affecting EPS. In fact Fedex may become a proxy trading tool for oil based commodities.

But when you issue guidance to this level and pop the quarterly EPS by 23% you need to put more on the table about the cost cutting program. When will the program be over? How much have you done? When will further impacts be realized? Are the cuts permanent or have you deferred stuff into the future? Anyone who has worked for a large corporation knows the term 'timing' when it comes to costs.