Credit: Shutterstock photoFedEx ( FDX ) is set to release its earnings for its fiscal first quarter on September 20 after market close. This will be the first quarterly results following FedEx's successful fiscal 2016, in which the company crossed $50 billion in revenue for the first time and significantly improved its operating margin by 220 basis points (bps). We expect the company to sustain this momentum on the back of the growing e-commerce sector.
In the previous quarter, FedEx's revenue grew by 7.1% year-over-year to reach $12.9 billion and beat analyst estimates of $12.8 billion . The company's adjusted earnings per share grew at 24% to reach $3.30, which was higher than the consensus estimate of $3.28.
Revenue Growth
Despite the continued slowdown in the major economies, the growth in the e-commerce sector is expected to drive top line growth for FedEx. The Express segment, bolstered by the integration of TNT Express, and the Ground segment, which added GENCO to its offerings, are the primary revenue drivers for the company and are expected to show growth on a year over year (y-o-y) basis.
Persistent low fuel prices will impact both the top and bottom line for the company. Despite lower fuel surcharge revenue, FedEx's operating profits are likely to be boosted by the reduction in fuel expenses, which contribute a significant portion of the company's operating expenses.
The integration costs of the TNT acquisition, which closed in May 2016 and is expected to be accretive in fiscal 2018, will impact the company's results in this quarter. Despite the impact on the company's financials, the acquisition has strengthened FedEx's position in the Europe and Latin American markets. With TNT's strong rail and road networks in Europe, FedEx is expected to offer competitive pricing to customers which will help it gain market share in the $6.6 billion European shipment market.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
