Categories Analysis, Industrials

FedEx (FDX) to report Q2 earnings on December 19. Here’s what to expect

Analysts estimate a sharp increase in Q2 earnings; revenue is expected to stay broadly unchanged

FedEx Corporation (NYSE: FDX) entered fiscal 2024 on a mixed note, reporting higher earnings for the first quarter despite a decline in revenues. It will be unveiling second-quarter numbers next week, amid expectations for strong earnings performance. Currently, the cargo giant is focused on revamping operations and streamlining networks for long-term cost savings, under a broad transformation plan announced earlier this year.

The company’s stock has gained an impressive 18% in the past one-and-half month alone, and it is trading well above the 12-month average price. Market watchers see a further upswing that could take the stock beyond the record highs of 2021, in the near future. Over the years, there has been a steady increase in the company’s dividend, which currently offers a better-than-average yield of about 2%. At the current valuation, FDX looks like a compelling investment option that long-term investors wouldn’t want to miss.

Q2 Report on Tap

FedEx is preparing to publish 2Q 2024 results on December 19, at 4:05 p.m. ET. On average, analysts following the company forecast adjusted earnings of $4.19 per share for Q2, which is up 32% compared to the prior-year quarter. The experts are looking for revenues of $22.41 billion for the November quarter.

The company has made good progress in its transformation program focused on consolidating operating divisions — Express, Ground, Freight, and Services into one organization called Federal Express Corporation — to achieve greater flexibility and efficiency. The phased transition is expected to be fully implemented by June 2024. In the most recent quarter, around $130 million was saved as part of the aggressive cost-cutting program, reflecting lower third-party transportation rates, optimized rail usage, and consolidation of sources.

From FedEx’s Q1 2024 earnings call:

We’re making our global network more efficient primarily through structural flight takedowns and efficiencies at our hubs and source as we rightsize the capacity across the network. In Europe, DRIVE initiatives are on track, and we expect them to gain further traction over the course of the year and into FY ’25… Our DRIVE expectations for this year include the G&A savings we have previously outlined, which we believe will start to ramp in the second half of this fiscal year.”

Mixed Outcome

In the three months ended August 2023, the core Express segment and the smaller Freight division contracted by 9% and 16% respectively, which was partially offset by a 3% increase in Ground revenues. At $21.7 billion, total revenue was down 6%. On the other hand, first-quarter earnings, adjusted for special items, jumped 32% annually to $4.55 per share. Earnings topped expectations while revenues missed, continuing the recent trend.

FedEx’s stock traded lower throughout Wednesday’s session, extending the recent weakness. The value has more than doubled since March 2020.

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