Fedex Corporation (NYSE:FDX) Posted Its Earnings Report on December 17- Investors Pulled Out From the Stock

FedEx Corporation (NYSE:FDX) recently reported its second fiscal quarter’s financial reports. The company saw a huge increase in its net income and revenues. Total revenues spiked up by 5 percent and reached to a total of $11.9 billion whereas the net income rose by 23 percent and flew to $616 million from a previous figure of $500 million. As far as the diluted earnings of FedEx Corporation (NYSE:FDX) are concerned, the figures rose from $1.57 for each share to $2.14 for each share in a matter of one year.

The management of the company reassured an earnings guidance of around $8.50 to $9 for each year for the year 2014. However, the company’s stocks came down by 3.75 percent on December 17, 2014, for the investors were expecting even stronger figures for the second quarter due to the dropping prices of fuel and the improvements in economy. Was this decline in the stocks of FedEx Corporation (NYSE:FDX) justified? Let’s have a look at some of the metrics and investors’ expectations.

The company promised its investors that it would bring the income margins of operations in double digits in the coming months. It seems like FedEx Corporation (NYSE:FDX) is quite close in achieving this goal. The company posted an income margin of 8.5 percent in the recent quarter. The company had been reporting a margin of around 6.5 percent for the last 5 years. Last year, it improved the figures to 7.6 percent, and now the numbers have reached 8.5 percent. Market analysts are quite optimistic about the income margin of the company.

These increases may seem insignificant, but in reality, the profit will increase many folds when the margins will be translated into profits. For instance, if the revenues of the company reached $47 billion and it sees an increase of 2 percent in the income margins, the extra profits that the company will make will be around $1 billion.
One reason why the investors might have pulled back from FedEx Corporation’s (NYSE:FDX) stock is the fuel cost’s impact on the profitability of the company. In the earnings call of FedEx Corporation (NYSE:FDX), the analysts and experts were surprised to hear that the company had recorded a minimal boost from the lowered fuel prices.

Alan Graf, the chief financial officer of FedEx Corporation (NYSE:FDX), explained that the edge the company gained from the lowered fuel prices was partially balanced out by the reduction in the surcharges of customers’ fuel bills. The logic is that the company passes an extra cost to its clients when the prices of oil rise, and so, it had to remove the surcharges from customers’ invoices when the fuel prices came down.

Coming to the stocks prices of FedEx Corporation (NYSE:FDX), the company, on the last trading day of December 18, 2014, started its stocks at a price of $170.95 and closed at a price of $174.38, after hitting the highest price of $174.38. The figures looked quite promising, especially after the decline that they had seen the previous day.