Shares of FedEx Corp. (NYSE:FDX) closed Tuesday down 0.54 percent at $139.09 per share and fell as much as 1.1 percent further in pre-market trading after the package delivery company reported underwhelming results for the quarter ended November 30. Revenue increased 3 percent on the year to $11.40 billion, just shy of the mean analyst estimate of $11.43 billion. Earnings increased 13 percent on the year to $1.57 per diluted share, below the mean analyst estimate of $1.64 per share.
Although the results came in below estimates, they certainly aren’t bad. Positives include a 15 percent increase in operating income to $857 million, and a widening of the operating margin from 6.5 percent to 7.3 percent. There was some favorable comparisons due to Hurricane Sandy, which ripped up the east cost last year, but FedEx has also been executing a cost management plan at FedEx Express.
Looking ahead, FedEx is forecasting full-year earnings growth in a range between 8 and 14 percent, up from a range between 7 and 13 percent. The top of this range would show earnings growth slightly higher than the current mean analyst estimate for full-year fiscal 2014 earnings of $7.03 per share.
Shares of FedEx are up about 47 percent this year to date, and has traded in a range between $90.05 and $140.97 per share. The stock surged in October when the company announced that it would repurchase up to 32 million shares of common stock, adding to the 7.4 million worth of repurchases remaining under the previous authorization. FedEx has purchased 10 million shares this year to date.
The repurchase signaled the company’s confidence in its own current and future performance, and with a trailing price to earnings of 27.86, FedEx stock actually looks pretty cheap relative to the United Parcel Service (NYSE:UPS). UPS, up 33.6 percent this year to date, its trading at a trailing price to earnings of 66.74.
UPS has more than twice the market cap that FedEx does but revenues are only about 23.6 percent higher, and net income is actually lower. FedEx also claims a higher gross margin, at 26 percent compared to 15 percent for UPS. UPS is expected to report earnings at the end of January.