Shareholders appeared to be happy with FedEx Corporation's (NYSE:FDX) solid earnings report last week. Looking deeper at the numbers, we found several encouraging factors beyond the headline profit numbers.
Check out our latest analysis for FedEx
How Do Unusual Items Influence Profit?
To properly understand FedEx's profit results, we need to consider the US$739m expense attributed to unusual items. It's never great to see unusual items costing the company profits, but on the upside, things might improve sooner rather than later. When we analysed the vast majority of listed companies worldwide, we found that significant unusual items are often not repeated. And that's hardly a surprise given these line items are considered unusual. Assuming those unusual expenses don't come up again, we'd therefore expect FedEx to produce a higher profit next year, all else being equal.
That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.
Our Take On FedEx's Profit Performance
Unusual items (expenses) detracted from FedEx's earnings over the last year, but we might see an improvement next year. Based on this observation, we consider it likely that FedEx's statutory profit actually understates its earnings potential! And the EPS is up 11% over the last twelve months. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. With this in mind, we wouldn't consider investing in a stock unless we had a thorough understanding of the risks. Case in point: We've spotted 2 warning signs for FedEx you should be aware of.
Today we've zoomed in on a single data point to better understand the nature of FedEx's profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
About NYSE:FDX
FedEx
Provides transportation, e-commerce, and business services in the United States and internationally.
Established dividend payer with adequate balance sheet.
