Strange.
I've been reviewing the publicly available information on Motley Fool Stock Advisor recommendation FedEx (NYSE:FDX) as I prepare to bring you the latest installment in our new line of Foolish Forecasts. In doing so, I routinely take a peek at what the suits up on Wall Street are saying about a company. In FedEx's case, I found a bit of an expectations disconnect.
As far as Wednesday goes, the news is unsurprising. Once again, the analysts have cribbed liberally from the company's own earnings guidance in preparing their own. In its fiscal Q1 earnings report released Sept. 21, FedEx revealed that it expected to earn somewhere between $1.30 and $1.45 per diluted share in fiscal Q2 -- the one that will be reported Wednesday. Wall Street dutifully parroted "$1.40" -- well within the company's own range.
But looking further down the line, FedEx itself predicted that by the end of this fiscal year (still quite a way off), it expects to have produced $5.25 to $5.50 worth of profits -- 10% to 15% better than last year. Here's where the analysts beg to differ: They think FedEx will do better than that. They think the company will exceed even the very top of its own guidance by nearly a full 1% and earn $5.55 for the fiscal year.
What does that mean for investors? Well, for one thing, if profits from the company's latest price hike enable FedEx to raise its earnings guidance Wednesday, that might not translate into the usual "pop" in the stock's price. FedEx will need to raise guidance just to match what analysts are already expecting; only a significant upping of the year's expected numbers will produce a pop.
And speaking of the price hike, I have to say the company's timing on this move was brilliant. As fellow Fool Tim Beyers explained back in October, the hike consists of two parts: a "5.5% boost in its list rates, offset by a 2% reduction in its fuel surcharge." On the one hand, the company shows that it's reducing its surcharge in tandem with the decline in gasoline prices (though gasoline prices have fallen considerably more than 2% over the past few months). On the other hand, FedEx tests the palatability of its list price hike long before the crucial Christmas shipping season arrives. If consumers balk and start flocking to rivals such as UPS (NYSE:UPS), FedEx has plenty of time to recant before the holiday season. And if consumers accept the hike in October, then by November or December, they might even have come to accept it as the "usual" price.
In other words, whatever news arrives Wednesday, I suspect that fiscal Q3 will be very merry indeed for FedEx shareholders.
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Fool contributor Rich Smith has no position in either company named above.
