Cumulative Q1 to Q3 2018 non-GAAP diluted earnings per share of FDX have been $9.41. In comparison, the full year’s guidance indicates an expected range of $15.00 to $15.40. To add, the current market expectation of about $5.70ish would put the full years diluted earnings per share at $15.11, making this a good mark to hit.
Actual Q4 2018 diluted earnings per share result came better than expected at $5.91. For the full year, it was reported to be $15.31. Actual results beat prevailing market estimate and 2018 outlook. $7.71 per diluted share was attributable to tax benefits.
The full year’s outlook for 2019 shows a slight increase in the estimated non-GAAP diluted earnings per share of $15.65 to $16.25. Capital spending is expected to flat out at around at $5.6 billion (2018 $5.7 billion). We also note an increased estimate in revenue growth. Generally, a good sign to support current price levels.
Share price development
Over the long term, share price development has been experiencing a classic uptrend with occasional “general” market fear correction. FDX has a low dividend yield of less than 1% per annum due partly to the strong price appreciation over the last years and partly due to the low payout ratio of around 13% (fiscal year 2018). We don’t deem the low yield and low payout ratio as negative, given an average market price increase of FDX shares of more than 22% over the past 10 years. However, the current market price seems to have imputed a significant uptrend potential already. We are cautious with fresh bullish engagements at current price levels.
The price movement after the announcement basically corrected more than 50% of today’s sell-off of about 2%.
Q4 2018 outlook for Q1 2019 and 2019 full year
Revenue growth of approximately 9%;
Operating margin of approximately 7.9% (compared to a recast fiscal 2018 operating margin of 6.5%);
Operating margin of approximately 8.5% excluding TNT Express integration expenses (compared to a recast fiscal 2018 operating margin of 7.8% excluding TNT Express integration expenses and FedEx Supply Chain goodwill and other asset impairment charges);
Earnings of $15.65 to $16.25 per diluted share before year-end MTM retirement plan accounting adjustments;
Earnings of $17.00 to $17.60 per diluted share before year-end MTM retirement plan accounting adjustments and excluding TNT Express integration expenses;
ETR of approximately 25% prior to year-end MTM retirement plan accounting adjustments, which is higher than the fiscal 2018 ETR due to tax benefits from transactions and TCJA impacts that will not reoccur during fiscal 2019; and
Capital spending of $5.6 billion.
Q3 2018 outlook for Q4 2018
Full year diluted earnings per share (non-GAAP) between $15.00 and $15.40
Full year effective tax rate with adjustments (non-GAAP) to range between 20% to 21%.
Q4 2018 operating results excluding TNT Express integration expenses (non-GAAP) between $1,950M to $2,050M.
Q4 2018 operating margin excluding TNT Express integration expenses (non-GAAP) between 11.0% to 11.8%.
Non-GAAP Express Segment operating margin to range between 9.9% to 10.4%.
About the company
FedEx began as Federal Express when the company was incorporated in 1971. Frederick W. Smith started with a revolutionary idea to create an airline to solve the logistics challenges businesses faced. Operations began in 1973 with the pickup and delivery of the first overnight packages. There were only 186 packages that night, but Federal Express created a new industry offering express door-to-door services. Since then, FedEx has grown to also offer ground and LTL freight services, plus many other business solutions for our customers.
The mission of FedEx Corporation is to produce superior financial returns for shareowners by providing high value-added logistics, transportation, and related information services through focused operating companies that compete collectively and operate independently.
Conflicting interest disclosure
We do not hold any interest in FDX. However, we may engage in positions within 72 hours depending on the signals provided by our trading strategies.
None of the above statements are to be construed as financial advice nor should they be used as a basis for making a financial decision. Investing in financial instrument carries great risks and may cause you to lose potentially much much more than what you invested. Historical market performance does not give an indication of future market performance. We advise you to hire a financial expert before making any financial decision of any kind and to ensure that you are aware of all the risks associated with investing in a particular financial product. Participating in electronic markets carry additional risks as well.