FedEx (FDX) is preparing to release its fiscal second-quarter earnings after the market closes on Thursday. Analysts predict a slight revenue dip before the shipping giant rebounds to growth in the coming quarters. This report is highly anticipated and could significantly impact FedEx’s future trajectory.
Analysts maintain a predominantly bullish outlook on FedEx stock. Visible Alpha reports that 11 out of 15 analysts recommend a “buy” rating, with three suggesting “hold” and one advocating “sell.” The average price target hovers around $308, signifying a potential 9% increase from Friday’s closing price of $283.42. FedEx stock has already appreciated by approximately 12% in 2024.
For the second quarter, the projected revenue is $22.14 billion, marginally lower than the previous year’s $22.17 billion. However, net income is expected to experience a nearly 3% year-over-year surge to $925.1 million, attributed to the company’s aggressive cost-cutting initiatives. Visible Alpha’s compiled estimates indicate a potential return to year-over-year revenue growth for FedEx in subsequent quarters.
FedEx Freight: A Potential Spin-off?
Last year, FedEx embarked on a significant restructuring endeavor, consolidating FedEx Ground, Services, and Express under a single corporate entity. FedEx Freight, however, remained a distinct business unit. Following the restructuring’s completion, FedEx announced in its June fourth-quarter report a comprehensive assessment of FedEx Freight’s role and overall portfolio structure. This review is slated for completion by the end of 2024.
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A Pivotal Quarter for FedEx
Citi analysts recently characterized the upcoming earnings report as potentially “one of the most consequential quarters in years” for FedEx. They suggest that spinning off the Freight business into an independent company could unlock substantial value. However, they caution that this might not be the optimal long-term strategy. The strategic direction FedEx chooses regarding its Freight division will undoubtedly have profound implications for the company’s future.
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The second-quarter earnings report will provide crucial insights into FedEx’s financial performance and strategic direction. Investors and analysts will closely scrutinize the results and any announcements regarding the future of FedEx Freight. This quarter could mark a turning point for the company, setting the stage for its long-term growth and profitability.
