Why FedEx Stock Might Be Overreacting To Its Earnings Report

Logistics and transportation behemoth FedEx Corporation (NYSE: FDX) declared its quarterly results Wednesday before market open, following which shares slumped and were recently trading $166.02, down nearly 5 percent.

FedEx reported net income of $616 million, or $2.14 per share, significantly up from $500 million, or $1.57 a share for the same period last year. However, analysts on the Street were expecting an EPS of $2.22 on the back of lower fuel prices. FedEx also reiterated its outlook for the year which analysts consider to be conservative.

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Arthur Hatfield from Raymond James was on CNBC to discuss why the company’s stock reacted so negatively to the quarterly results.

"I think the thing that jumps out with regards to reactions to the results today is, I think a lot of my peers were a little bit too aggressive on the impact from fuel on the quarter. While it's somewhat of a straightforward calculation, the application of how it flows through the company's business is not so simple and so, I think, some of the estimates were a little bit ahead based on that and as a result you are getting a little bit of a negative reaction," Hatfield said.

Guidance Reiteration

"I think, the biggest takeaway here is that more importantly than just fuel, is that the company is on target with regards to their cost reduction program. We saw significant improvement in margin at the Express unit and really that’s the unit that provides the most operating leverage and so I think, because of that, because they are on pace with that program, the company felt comfortable reaffirming its guidance for the full year," Hatfield added.