Will FedEx Cash In On Online Shopping Surge?

| About: FedEx Corporation (FDX)
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FedEx Corp. (NYSE:FDX) is set to report FQ3 2014 earnings before the market opens on Wednesday, March 19th. This December was marked by brutal snowstorms and extremely cold temperatures, which kept shoppers out of retail stores. Amazon.com (NASDAQ:AMZN) got bombarded during the holiday season and rival UPS (NYSE:UPS) needed to hire 30,000 more temporary workers than expected to keep up with demand. As a result, margins were much thinner and UPS earned $1.25 EPS compared to earlier estimates of $1.43. EPS estimates for FedEx have fallen as well throughout the quarter, but not nearly as sharply as they did for UPS. Here's what investors are expecting from FedEx on Wednesday.

The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.image

(Click Here to see Estimates and Interactive Features for FedEx)

The current Wall Street consensus expectation is for FedEx to report $1.52 EPS and $11.462B revenue while the current Estimize.com consensus from 29 Buy Side and Independent contributing analysts is $1.55 EPS and $11.490B in revenue. This quarter the buy-side as represented by the Estimize.com community is expecting FedEx to beat the Wall Street consensus on both EPS and revenue.

Over the past six quarters the consensus from Estimize.com has been more accurate than Wall Street in forecasting FedEx's EPS and revenue 3 and 5 times, respectively. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non-professional investors, Estimize has created a data set that is more accurate than Wall Street up to 69.5% of the time, but more importantly it does a better job of representing the market's actual expectations.

The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing a moderate difference between the two groups' expectations.image

The distribution of estimates published by analysts on the Estimize.com platform range from $1.45 to $1.60 EPS and from $11.334B to $11.605B in revenues. This quarter we're seeing an average sized distribution of estimates on FedEx.

The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates signaling less agreement in the market could mean greater volatility post earnings. image

Over the past four months, the Wall Street EPS consensus fell from $1.55 to $1.52 while the Estimize consensus slipped from $1.57 to $1.55. Meanwhile, the Wall Street revenue forecast dropped from $11.502B to $11.462B while the Estimize forecast also decreased from a high of $11.529B to $11.490B. Timeliness is correlated with accuracy and downward analyst revisions at the end of the quarter are often a bearish indicator.image

The analyst with the highest estimate confidence rating this quarter is Nils1975 who projects $1.46 EPS and $11.334B in revenue. In the Winter 2014 season, Nils1975 is rated as the 18th best analyst and is ranked 12th overall among over 3,950 contributing analysts. This season Nils1975 has been more accurate than the Street in forecasting EPS and revenue 64% and 70% of the time, respectively, over 89 estimates. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research, which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, Nils1975 is making a bearish call expecting FedEx to miss the Estimize community's expectations on both EPS and revenue by a wide margin.

This quarter contributing analysts on the Estimize.com platform are expecting FedEx to beat the Street's forecasts on both the top and bottom line. Costs are expected to be higher this quarter and weigh down FedEx's earnings, but investors still have significantly higher expectations than Wall Street.

Disclosure: None.