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United Parcel Service, Inc. (UPS), eBay Inc (EBAY): Will FedEx Corporation (FDX) Earnings Deliver Faster Growth?

FedEx Corporation (NYSE:FDX) will release its quarterly report on Wednesday, and investors have recently been extremely upbeat about the stock’s prospects, bidding shares to levels not seen since 2007. With so much optimism, it’ll be important for FedEx Corporation (NYSE:FDX) earnings hold up well, both for its stock’s sake and as a bellwether of the entire global economy.

FedEx Corporation (NYSE:FDX)FedEx Corporation (NYSE:FDX) is often seen as a barometer of economic activity because when businesses are thriving, they tend to transport more of their goods to customers and FedEx gets its share of delivery business. Yet equally important factor is how customers decide to ship their goods, as prices for different delivery expectations can vary widely and have a big impact on FedEx’s overall profit margins. Let’s take an early look at what’s been happening with FedEx Corporation (NYSE:FDX) over the past quarter and what we’re likely to see in its report.

Stats on FedEx

Analyst EPS Estimate $1.51
Change From Year-Ago EPS 4.1%
Revenue Estimate $10.97 billion
Change From Year-Ago Revenue 1.7%
Earnings Beats in Past 4 Quarters 2

Source: Yahoo! Finance.

How high will FedEx earnings fly this quarter?
Analysts have marked down their view on FedEx Corporation (NYSE:FDX) earnings substantially in recent months, cutting $0.08 per share from their August-quarter estimates and about $0.40 per share from their fiscal 2014 and 2015 full-year projections. Despite those cuts, the stock has managed to climb 10% since mid-June.

FedEx’s May-quarter report shows some of the challenges that the company has gone through lately. Even though it managed to produce impressive earnings after adjusting for the costs of restructuring its business and for charges related to its aircraft fleet, it continues to see pressure ahead, and shareholders took the pessimistic view in bidding the stock downward.

But in early July, FedEx Corporation (NYSE:FDX) stock recovered its lost ground on speculation that hedge fund maven Bill Ackman might take a stake in the delivery company. Those rumors came to naught, though, as the target Ackman had described turned out to be Air Products & Chemicals rather than FedEx. But the shares held onto much of their gains regardless.

FedEx does face weakening demand for its air cargo services, as customers shift more of their business to ground shipping services. Even internationally, customers have been willing to accept slower shipping methods. In response, FedEx Corporation (NYSE:FDX) is consolidating its priority-shipping capacity to cut costs and better reflect customers’ wishes. That has the arguably unintended benefit of making the company a better competitor against United Parcel Service, Inc. (NYSE:UPS), which has historically had an edge over FedEx in ground transportation. When United Parcel Service, Inc. (NYSE:UPS) announced its own negative earnings report in July, FedEx shares jumped in response. Moreover, the $1.5 billion in expected cost savings could help boost margins and produce even greater earnings growth in the years to come.

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