FedEx (NYSE:FDX) started the new fiscal year off right back in September by adding a fifth quarter to its string of earnings beats. But can the company extend its streak when it reports its fiscal Q2 2007 numbers on Wednesday?

What analysts say:

  • Buy, sell, or waffle? The 20 analysts following FedEx split their votes evenly between "buy" and "hold."

  • Revenues. On average, they expect to see sales growth accelerate to 10%, for revenue of $8.9 billion.

  • Earnings. Profits are predicted to rise 14% to $1.75 per share.

What management says:
When last we checked in on CEO Frederick Smith, he was telling us that FedEx intended to spend $3 billion in capital expenditures this year, up from the previous estimate of $2.9 billion, with 75% of that amount being "expansion capex" incurred to build the business. That's probably still true, but according to a press release issued last month, the company's switch from buying Airbus freighters to 15 new Boeings (NYSE:BA) will boost capital-expenditure spending by $500 million over the next five years. With most of the purchase price coming due only when deliveries begin arriving in 2009, this year's capex shouldn't rise much at all, but expect the expenditures to mount in coming years.

Other guidance changes announced back in the Q1 earnings release remain in force -- specifically, a reduction of the full-year profits to the $6.30-to-$6.55-per-share range.

What management does:
Earnings walkback or no, it's been up, up, and away until now for FedEx's margins. On a rolling basis, it has added a full percentage point to its operating profitability over the past year and has dropped 80 basis points of that amount to the bottom line.

Margins %

5/05

8/05

11/05

2/06

5/06

8/06

Op.

8.4

8.2

8.7

8.8

9.3

9.7

Net

4.9

4.8

5.1

5.3

5.6

5.9
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
David Gardner, co-lead analyst at Motley Fool Stock Advisor and the man who picked FedEx for our portfolio way back in January 2003, has an important update on the company to share with Stock Advisor subscribers. Because his comments are so recent (just last week, in fact), it wouldn't be fair for us to release it for general distribution just yet. But anyone who isn't yet a member -- and lacks the patience to wait another month or so to release David's comments -- can take a free trial to the newsletter service and get immediate access.

In the meantime, here's what David had to say six months ago, in his last update: FedEx is "seeing its strongest growth in international shipping, which carries the highest margins. Only about 14% of the packages FedEx receives each day are bound for an international destination, so there's a lot of growth potential there." Looks as though those margins aren't done expanding just yet, folks.

Competitors:

  • ABX Air (NASDAQ:ABXA)
  • UPS (NYSE:UPS)

Just how good a company is FedEx? It might be the best investment of 2007. Find out why in "The Best Blue Chip for 2007: FedEx."

Fool contributorRich Smithhas no interest, short or long, in any company named above.