FedEx (NYSE:FDX) may report a positive earnings surprise when it posts its fourth-quarter and full-year 2023 results after the closing bell on Tuesday, according to analysts at UBS.
UBS, which has a ‘Buy’ rating and a 12-month price target of $260 on FedEx, is maintaining its 4Q earnings forecast of $5.11 a share for the global delivery firm, which compares to consensus of $4.85 per share.
A year ago, it reported 4Q 2022 EPS of $6.87.
“While FDX is still facing weak demand, we expect a slight easing in the pace of y/y decline in volume,” the analysts wrote in a client note.
“We model Domestic Express volume of -10% in 4Q compared to -12.5% y/y in 3QF23. In the Ground business we are modeling a 7% decline in volume and 130 bp (basis points) of y/y margin improvement.
The analysts noted the cost savings and the company’s DRIVE program, which is expected to generate $4 billion of permanent cost reductions by fiscal 2025, are the most important drivers of margin improvement and EPS growth.
They also believe the company has room to provide an upside guidance for its 2024 financial year.
“We expect FDX to discuss their cost reduction expectations for F2024 and also talk about key drivers of the cost reduction,” they added.
“We also anticipate favorable commentary on the pricing environment which is another important driver.”
FedEx’s shares were 0.14% down at $235.10 by 1pm on Friday.
Contact the author at stephen.gunnion@proactiveinvestors.com