The world’s largest express-parcel delivery firm FedEx (FDX:NYSE) is due to report earnings for the fourth quarter and the full year to the end of May on 24 June, and there is a lot hanging not just on the results but also the outlook.

Six months ago, the firm lowered its revenue growth forecast for the full-year from a low single-digit increase to flat, and cut its EPS (earnings per share) guidance from around $18 to between $16.45 and $17.45 before accounting adjustments for its mark-to-market retirement plans.

The company also said it would spin off its FedEx Freight division, which generated around 10% of group revenue in the year to May 2024, through a separate stock market listing.

Three months ago, the firm revised its revenue growth forecast down again, from flat to ‘slightly down’, and cut its EPS guidance to a range of $15.15 to $15.75, or 14% lower at the mid-point than its original forecast.

The group also lowered its capital spending target for the year to May by $300 million to $4.9 billion saying it would prioritise network optimisation and improved efficiency, including facility modernisation and automation.

Unsurprisingly, brokers have lowered their price targets across the board, from the most bullish (Barclays, which cut to $330) to the most bearish (Morgan Stanley, which went to $200).

Morgan Stanley’s Ravi Shanker expects fourth-quarter EPS to disappoint at $5.33 compared with the consensus of $5.99, due to a combination of factors including rising input costs, fewer operating days, weakness in B2B volumes and the impact of tariffs on imported goods from April.

Shanker also expects margins to disappoint, especially in the Express and the Freight divisions, as lower volumes and a lack of demand offset the firm’s self-help initiatives.

With a street-low price target, the analyst argues FedEx’s risk-reward profile is firmly skewed to the downside unless management can give a clearer, more positive outlook for the core business this time around. 

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