It's been a good six quarters since FedEx (NYSE:FDX) last missed a consensus analyst earnings estimate. Will Wednesday morning's news be lucky number seven for shareholders?

What analysts say:

  • Buy, sell, or waffle? Twenty analysts follow FedEx, giving this highflier 14 buy ratings and a half-dozen holds.
  • Revenues. On average, they expect to see sales rise 9% to $8.7 billion.
  • Earnings. Profits, however, are predicted to fall 4% to $1.33 per share.

What management says:
Characterizing fiscal Q2 2006 earnings as "better than expected" back in December, CEO Fred Smith went on to express confidence not in Q3 2006 (as one might expect), but rather in Q4. It was CFO Alan Graf who predicted "a difficult year-over-year comparison" to last year's fuel surcharge-supercharged earnings in Q3 2006, likely causing a decline in profits.

Even so, predicting "continued global economic growth in 2007," helped by a "3.5% average price increase on U.S. domestic and U.S. export express shipments, and a 4.9% average price increase on FedEx Ground services," Smith expects that FedEx will end this year with profits of $6.35 to $6.65 per share. That's even after subtracting the $0.25 per share in costs incurred from last quarter's renegotiation of contracts with FedEx's pilots.

What management does:
The new pilot contract took a chunk out of profits, big enough to stop cold its seemingly inevitable march to ever-higher profit margins. That said, it's worth pointing out that FedEx today still earns a good 100 basis points more in operating profits than it did one year ago and drops 70 of those extra basis points all the way down to the bottom line.

Margins

8/05

11/05

2/06

5/06

8/06

11/06

Operating

8.2%

8.6%

8.8%

9.3%

9.7%

9.6%

Net

4.8%

5.1%

5.3%

5.6%

5.9%

5.8%
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:
In re-upping FedEx for his side of the Motley Fool Stock Advisor portfolio back in January, Fool co-founder David Gardner pointed out that this march has gone on far longer than just one year. Says David: "This stock has been, with relatively little diversions, on a steady upward course for more than two decades."

Not one given to understatement, David explains that: "This, to me, is a quintessential Untouchable company. It is the only scaleable logistics-oriented delivery system -- and as global commerce grows and affluent (and business-generating) middle classes expand, the demand for FedEx's services will substantially increase. I like the stock at these levels, but if it got cut down sharply I'd be first in line to go bargain shopping."

Good news, David! And good news for investors, too. Since being tapped for a re-up, FedEx has paced the fall of the S&P, and can today be had for a tidy 3.6% discount to its most recent recommendation price. Go wild.

(Why would you want to buy a stock that's going down? Oh, I don't know -- maybe because it's a great company, as evidenced by the fact that since David first recommended it in February 2003, FedEx has nearly doubled in value, beaten the S&P 500 by a good 45 percentage points, and beaten archrival UPS (NYSE:UPS) by 75 percentage points. Read why David chose FedEx over UPS back then, and learn more about why he likes the stock again at today's prices, when you claim your free trial membership to Stock Advisor.)

UPS is a Motley Fool Income Investor recommendation. Find more dividend superstars with a free 30-day trial of James Early's low-risk, high-reward newsletter service.

Fool contributor Rich Smith has no interest, short or long, in any company named above.