FedEx (NYSE:FDX) will report its fourth-quarter financial results for Fiscal 2023 on June 20. The transportation, e-commerce, and business services provider continues to grapple with lower volumes as macro headwinds weigh on consumers’ discretionary spending. Investors expect to see that while Fedex’s top line could remain under pressure, a focus on driving revenue per package and aggressive cost-saving initiatives could drive a sequential improvement in sales and earnings.
Investors should note that FedEx is advancing well on its global transformation plan (DRIVE) to improve its long-term profitability. Through DRIVE, FedEx expects to generate over $4 billion in annualized cost savings by the end of fiscal 2025.
Q4 Earnings: Here’s What Analysts Expect
Analysts expect FedEx to report quarterly sales of $22.55 billion in Q4, compared to $24.4 billion in the prior-year quarter. The year-over-year decline reflects continued weakness across its business segments.
Providing his outlook on FDX’s Q4 performance, Robert W. Baird analyst Garrett Holland expects results to be a bit softer, reflecting weakness in airfreight pricing and demand. However, the analyst remains upbeat about the Fiscal 2024 profitability outlook, as he expects the DRIVE efficiency program to cushion its earnings in the coming quarters.
In a note to investors dated June 13, Holland projected a 1% decline in Ground revenue (small-package ground delivery revenue) due to lower volumes. Meanwhile, the analyst sees a 9% decline in the Express (time-critical small-package ground delivery and airfreight transportation services) segment’s revenue, reflecting lower airfreight rates and volumes.
Finally, for the Freight (less-than-truckload freight transportation services) segment, the analyst calls for a 9% decline in revenues because of lower volumes.
Echoing similar sentiments, Goldman Sachs analyst Jordan Alliger expects weak demand to hurt its top line in the fourth quarter. However, the analyst expects the company to benefit from cost reduction measures.
While both of these analysts expect near-term weakness in revenue, they maintain a bullish stance ahead of the Q4 results on account of FedEx’s efforts to reduce takeout costs and drive profitability. As for Q4, analysts expect FDX to report earnings of $4.85 per share, compared to $6.87 in the prior-year quarter. However, this compares favorably to Q3 earnings of $3.41 a share.
Is FedEx a Strong Buy?
FedEx stock has gained over 34% year-to-date. Meanwhile, Wall Street analysts maintain a cautiously optimistic outlook about FDX stock ahead of the Q4 print. It has received 16 Buy and six Hold recommendations for a Moderate Buy consensus rating. Furthermore, analysts’ average price target of $262.55 implies 12.46% upside potential.
Investors should note that Thomas Wadewitz of UBS is the most accurate analyst for FDX stock, according to TipRanks. Copying Wadewitz’s trades on FDX stock and holding each position for one year could result in 65% of your transactions generating a profit, with an average return of 19% per trade.
