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How FedEx Just Beat EPS By A Whopping 14 Cents
Moments ago FedEx reported first quarter earnings ended August 31, which blew expectations out of the water, because instead of the consensus EPS print of $1.96, EPS reported a whopping $2.10 for Q1, a massive 14 cent beat, and up 37% from last year's $1.53 reported EPS.
Wow: it must be a great operating environment, with logistics and global trade humming for FDX to beat so impressively, right? Wrong.
Here's how it happened, from the company's own press release:
During the quarter, the company acquired 5.3 million shares of FedEx common stock. As of August 31, 2014, no shares remained under the existing share repurchase authorizations. Share repurchases benefited earnings in the quarter by $0.15 per diluted share.
Oh well, time for another stock repurchase authorization: this time bigger, better and even more uncut. Charted:
In other words, had it not been for the stock buyback, FedEx would have missed EPS by 1 cent despite also beating revenues handily, with Q1 sales $11.7 billion on expectations of $11.47 billion.
Which brings us to why this troubling disconnect took place: rising costs... and FedEx's prompt response:
As previously announced, FedEx Express, FedEx Ground and FedEx Freight will increase shipping rates effective January 5, 2015.
FedEx Express will increase shipping rates by an average of 4.9% for U.S. domestic, U.S. export and U.S. import services.
FedEx Ground and FedEx Home Delivery will increase shipping rates by an average of 4.9%. In addition, as announced in May, FedEx Ground will also begin applying dimensional weight pricing to all shipments.
FedEx Freight will increase shipping rates by an average of 4.9%. This rate change applies to eligible FedEx Freight shipments within the U.S. (including Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands), between the contiguous U.S. and Canada, within Canada, between the contiguous U.S. and Mexico, and within Mexico
Apparently they didn't get the "deflation" memo.
Finally, how was CapEx in the quarter? Answer: $720 million, which is almost as much as the $791 million in stock repurchases in the quarter.
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14 cents.....top that!
FedEx had an EPS beat
The way that they did it was neat
They took out a loan
More shares they now own
A share buyback engineered cheat
I would have an easier time believing these corporate 'earnings' numbers if they said it was magic.
"Our $0.14 beat this quarter is directly attributed to magic. The recent hiring of the great great great great great great great great great great grandson of Merlin was a strategic acquisition and will pay dividends for years to come."
Interesting how the graph presents that the Feb quarter stood out from the 2 quarters on either side. Subliminal messaging?
As my daughter likes to say......"on accident". The corporate contempt is palatable.
Losing profits so raise prices..
Yeah, that makes sense..
NOTT!
Worked for USPS.
Oh wait.....
That's how they're doing it actually. My buddy who works at the PO...and for the record so did for about a decade...best job ever...all of Fed Ex and UPS are dropping off all their packages to be delivered by the Post Office. How's that for "free market capitalism"!
The reason is simple enough...the liability of package delivery is so high "only the Federal Government can afford it."
"Fed Ex and UPS are dropping off all their packages to be delivered by the Post Office."
This is a coroporate subsidy paid for by Taxpayers. USPS is now subsidizing corporate shippers.
USPS property is being auctioned off and privatized in California and other places. Very lucretive for the politically connected that have cornered those auctions and first dibs on the oft prime real estate being dumped even as the USPS is subsidizing shipping corporations by shipping their bulk in discount.
Blatant and rampant Fascism.
It's the "last mile" that poses the problems for the private carriers. It's a symbiotic relationship.
http://www.minyanville.com/business-news/editors-pick/articles/postal-se...
We can buy our way to prosperity!
I used to think people like Nancy Pelosi and Joe Biden were complete dingbats. Now I realize they are, in fact, the visionary geniuses of our time. Paul Krugman, too. All of us who think this is insane and will have dire consequences are the mouth-breathers.
I agree completely!
And we only need to have hope to change for the better!
La la la la la....
I'm just glad I'll never have to worry about becoming pregnant ever again.
Since the only thing holding this (accelerating) centrifuge together is "faith and belief" you ain't that far off the mark.
I'm sure CNBC will be explaining this to the viewers shortly...LOL
Funny how it was a main story on CNBC around 4 AM how they were increasing prices (before earnings announce) and that competition is eating their top line. WTF I say to myself usually competition forces lower prices.
The competition is from USPS.
It wasn’t Colorado weed sales?
I don't think much of FedEx since they made all their delivery drivers independent contractors who must buy or lease trucks from FedEx. The drivers now do not make much money and will run over anything in their way.
If they force them to 29.5 hr/wk.....I don't see how they make it.
Do you really care if they run over children, pets, or grandmothers with walkers? If my package gets to me by 10am, I'm a happy camper.
I got a brother that sends me care packages of weed from Colorado via FedEx.....it's some pretty wicked stuff.
Let's just keep this between ourselves.
Man, I'd be nervous about that. People have been busted for that before and it's usually on the receiving end. Maybe they use dogs? I don't know.
Oh man.....are you talking to me on a cellular phone?
Prank caller.....prank caller!
http://www.youtube.com/watch?v=2nG7aix-VO4
Classic. :-)
No, this is classic. Cheech & Chong "Don't Answer the Phone"
http://www.youtube.com/watch?v=h-ns5HvMVuM
This rate hike is just an anomaly, and there is no major issue with infation. Shipping rate increase is not significant, because most Americans do not use FedEx any way. These price increases will just fatten their corporate profits, and will not help a comon man.
it's all those golf bags they ship to resorts for all those golf rounds and then back home...I am going to reno and fedex will round trip my golf bag for $120 from east coast..funny tho called the hotel and they said you could get on any golf course w/o reservation, just walk on..hmmm maybe it's not the golf bag revenue..
Just make sure that hotel you're staying at doesn't hit you with a surcharge for receiving your FedEx package. They do stuff like that now.
no worry no debt, found out i can rent a bag for $30 with new clubs my choice, sorry fedex.
nothing to see here folks, move along......
"Fedex is on Fire" troll on CNBC now
"Fedex is on Fire"
Yeah, smoke and mirrors
Coutrtesy of the taxpayer.
"Private profits/socialized losses" as a business model. Move along...
Fedex execs get to keep their jobs for another 3 months based on some cash/accounting adjustments.
Visionary brilliance!!!! yellen would be proud.
can meet kick, kick meet can.
Federal Express is as Federal, as the Federal Reserve.
Backing out the 15 cents, EPS still increased from $1.53 to $1.95. I do not understand the need for a 5% price increase when you are making a nice profit now. I think the reality is that there is not much competition in this field, as UPS is not cheap either, and the USPS is not reliable.
This FedEx price increase may just save USPS from vanishing.
There is nothing more reliable than the US mail. Those folks are out on the street everyday but Sunday.
I laughed when I saw how small and pathetic the operation was at Fed Ex. I would be shorting that stock btw.
I agree. Our family ran an internet retail coffee business for a number of years and shipped literally tons of coffee USPS priority. Never had a problem Personally I have shipped several thousand eBay sales (stamps, coins, gold, junk) with similar excellent results.
great article TYLER, but margins are very good..improvement yoy and UPS sucks.... and there is growing internet....like FDX
With these numbers the CEO gets another bonus and more free stock options...good for him..its showtime quarter by quarter...noone thinks 5 years out..
What happens when they have to sell these shares???
They don't, they cancel them, then if they want more money they just issue a new batch of shares
That would be the same thing, unless I missing something.
Wait, how did they "beat" due to a stock buyback? Can't the analysts handle the math of factoring that in to expectations for EPS?
analysts and maths, two words that are rarely if ever associated
We use Fedex as our primary ground shipper and last month our driver was showing up as early as he could per our pick-up window. This happened because business was dead and they weren't picking up much.
I am very surprised to see them even make earnings. Internet sales are in the dumper and most people are using USPS if any package is small enough. Margins have completely disappeared thanks to Amazon and going into Christmas there will be a lot fewer vendors selling.
Another increase will finish off even more vendors. All these buy-backs and M&A are destroying the small business and wiping out jobs. Anyone thinks that this is good needs their heads examined.
Yep. And "they do have well compensated psychiatrists in New York and. LA." Best in the world actually.
Not as good as the Basic Research ones of course. "What better group to study than College Sophmores!" as they say.
Mental illness is still not considered an illness in the USA btw. "You mind had no legal protections." Hmmmm. Wonder why that is...
Jim Cramer wanking all over FEDEX now, not one mention of the buybacks, CNBC truly are a pile of shite
A great time to buy before the elections.
When the price of gas is so low.
And CPI is droping.
Yes, buying now is good.
The price of gas wont go up post election.
If it does, just sell.
No investment here. Move along.
Agree with it! bunch of wankers
They reduced their denominator.
By reducing the number of common stock outstanding.
Wow. A monkey could have done that.
Congrats to the head monkey at fedex.
ZH perma-bears wake up. With failure not an option, the New Normal means permanent aggressive Fed and all central banks, market interventions and near-zero rates for decades. Jawboning is tried first, then more QE, as needed. They must keep stock buybacks going, keep consumers borrowing money and buying crap, keep the government afloat. Limitless credit expansion is a given. Massive bad loans, more bailouts. Why does the market ignore all the dangers? The Fed has never failed, “You cannot fight the Fed”. They are viewed as omnipotent and will “do whatever it takes.”
Five years from now with the Dow at 31,250, the national debt at $27T, and the Fed balance sheet doubling, bears will still be saying the same things, “This is just not sustainable!” Yes, it is, until it isn’t.
For you its perfectly sustainable becoz at the end of the day its just about ticker. For people that want a sustainable economy and country with JOBS as well as INCOME, sustainability is a BIG ISSUE! So, from the general populaces angle, they will tell you to FARK OFF and from Wall Streets angle thanks for the trading fee and I bid you good riddance. So to answer the perma-bear comment, HELL YEA!
Anytime anyone on any of the financial shows talks about the economy it is nothing more than a sales pitch now. Just an old ex carney used car salesman touting "all the miles were highway miles" while banging on the hood of a clunker. The veneer is wearing thin, their suits are shiny from wear and teeth stained from years of abuse. Anyone who believes that nonsense gets what they deserve. I listen to them now mainly for entertainment and am constantly amazed how brazenly they misrepresent the truth. It's a whole society who lives off the backs of others and provide no real service to the economy, when the wind blows the wrong way you'll be hard pressed to find one of them to confront them with the lies they espoused for years.
Fedex is raising delivery rates starting in 2015.
Recovery!
Yeah, some dipshit money manager on Bloomturd this morning touting FedEx earnings speaking to the recovery gathering strength. Guy is either a tool or moron (or both).