Market Overview

Why Upside On FedEx's Acquisitions Is More Important Than Q3 Miss


Despite a notable third quarter earnings miss, shares of FedEx Corporation (NYSE: FDX) were trading higher Wednesday and analysts at UBS may have the reason why.

Thomas Wadewitz commented in a research report FedEx earned $2.35 per share in the third quarter, which fell "significantly" short of his estimates of $2.55 per share and the consensus estimate of $2.64 per share. But beyond the headline numbers, FedEx expressed encouraging data from its TNT Express acquisitions.

FedEx now expects to see an operating income improvement of $1.2 billion to $1.5 billion in fiscal 2020 off the 2017 base from Express TNT, which is well above the analyst's 2020 forecast of just $630 million and appears to be more optimistic given company's own estimate of generation $750 million in synergies.

FedEx Ground Also Encouraging

Wadewitz also noted FedEx's margins in its Ground unit fell around 165 basis points on a year-over-year, but was still 60 basis points better than expected. Also, ground volume growth slowed to 2.2 percent year-over-year but at the same time revenue per piece rose 6 percent year-over-year.

Wadewitz suggested this "recipe" of slower volume growth and more favorable pricing bodes well for the Ground segment's outlook.

Bottom line, upside from FedEx's recently acquired properties and an encouraging outlook for the Ground segment supports an attractive multi-year earnings per share growth outlook and upside for the stock.

Shares remain Buy rated with an unchanged $215 price target.

See Also:

FedEx Q3: Margin Pressure, TNT Acquisition And The 'Path Of Synergies'

Wells Fargo Sees FedEx More Likely To Deliver Gains Than UPS

Latest Ratings for FDX

Sep 2020Deutsche BankUpgradesHoldBuy
Sep 2020StifelUpgradesHoldBuy
Sep 2020UBSMaintainsBuy

View More Analyst Ratings for FDX
View the Latest Analyst Ratings


Related Articles (FDX)

View Comments and Join the Discussion!

Posted-In: Express fedex FedEx Earnings Thomas Wadewitz TNTAnalyst Color Analyst Ratings

Latest Ratings

View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at