FedEx (FDX) is poised to report fiscal Q4 earnings before interest and taxes, and earnings per share modestly below consensus as margin pressures continue to outweigh stable revenue trends, Morgan Stanley said in a Wednesday note.
The investment firm said the company is entering a new phase following the spin-off of FedEx Freight (FDXF) and investors are likely to focus on long-term fundamentals.
The brokerage added that as both businesses begin operating independently, investors will increasingly focus on the sustainability of normalized margin profiles as the gap between revenue performance and earnings conversion remains a key concern.
Morgan Stanley said it expects quarterly EBIT of $1.92 billion, compared with a consensus estimate of $1.99 billion. It expect EPS of $5.58 versus a consensus of $5.92. The brokerage added that consolidated results may be less meaningful following the company's spin-off.
For the fiscal Q4, FedEx Express' continued pricing strength, fuel surcharge upside and share gains are likely to be offset by persistent cost headwinds and international trade disruptions. Weaker-than-expected pricing and continued volume pressure at FedEx Freight are expected to weigh on earnings, according to the note.
FedEx is scheduled to report its fiscal Q4 results on June 23.
Morgan Stanley lowered its price target to $160 from $230, with an underweight rating.
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