That was confusing.
Higher diesel prices and rising interest rates didn't derail FedEx's earnings -- or earnings from its recently spun-off kin: FedEx Freight. Third-quarter results topped Wall Street expectations.
FedEx stock still fell as investors worked through guidance. Then it rose again as Wall Street weighed in.
Wednesday evening, FedEx reported third-quarter earnings per share of $3.74 from sales of $22.9 billion. Wall Street was looking for earnings per share of $3.34 from sales of $22.7 billion.
Year-ago comparisons are tough. FedEx spun off its less-than-truckload $(LTL)$ business, FedEx Freight, in June. LTL businesses serve mainly industrial customers that don't need entire truckloads to move goods relatively short distances.
Guidance was nudged higher. For the full year, FedEx expects revenue growth of 12%, up from prior guidance of 11%. Earnings per share should be about $18.30. The midpoint of previous guidance was $17.50 a share. Wall Street currently projects $17.68 a share.
New guidance implies fourth-quarter earnings of about $6.33 a share, while Wall Street projects EPS of $6.58.
But there is a mismatch between full-year and quarterly numbers. Based on full-year estimates compiled by FactSet, analysts should have been looking for $5.92 a share. The spinoff of FedEx Freight could be the reason. (FedEx recently changed its fiscal year-end to December from May, which might be affecting data providers such as FactSet.)
Whatever the reason, shares were down 2.7% at $296.50 Thursday shortly after results were released. They rallied to $307.82, closing up 1% on the day.
Bernstein analyst David Vernon, in his post-earnings report, noted strong pricing that is offsetting cost inflation. Truist analyst Lucas Servera said the company was "building momentum into 2027" in his post-earnings report.
Despite the initial drop, numbers looked OK. Domestic revenue grew 10% year over year, with pricing and volumes helping. International revenue grew 17%. Adjusted operating income of about $1.2 billion was in line with Street estimates.
The confusion continued on Thursday, after FedEx Freight took its turn reporting results. It announced adjusted operating income for the four months ended September of $510 million, up 16% year over year. Investors are getting four months of results because the company is transitioning to a December fiscal year-end after spinning out of FedEx in June.
Wall Street was looking for operating profit of $335 million, but that is a three-month figure. Comparability is tough, but results look solid. FedEx Freight management raised its outlook for adjusted operating profit for the transition period from June 1 through Dec. 31, to $695 million to $715 million, up from a previous range of $605 to $645 million.
Through Thursday trading, FedEx stock had risen about 32% year to date, about 20 percentage points ahead of the S&P 500.
FedEx Freight stock has had a tougher time. Shares were north of $180 shortly after the spin. FedEx Freight stock was up 0.3% in after-hours trading at $110 shortly after results were released.
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