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FedEx falls on mixed earnings report

CNBC logo CNBC 20/12/2016 Antonio José Vielma

FedEx (FDX) delivered fiscal second-quarter earnings Tuesday that missed Wall Street expectations, while barely beating on revenue.

Shares of the shipping company fell more than 2 percent as FedEx reported adjusted earnings of $2.80 a share on revenues of $14.93 billion.

The company's full-year adjusted earnings outlook for 2017 remained unchanged at between $11.85 to $12.35 per share. Daily package volumes for its ground business segment increased 5 percent during the quarter, driven by e-commerce and commercial packages.

In the news release, Chairman and CEO Fred Smith said the company is "in the home stretch" of its peak shipping season, noting that service levels are high.

Analysts expected the company to post earnings of $2.90 a share on $14.92 billion in revenue, according to a Thomson Reuters consensus estimate.

One big factor Wall Street will be looking at is the impact of e-commerce and how the surge in package volume during the holiday season is affecting the margins of FedEx's ground business segment. The company has recently been investing heavily to handle capacity.

Regarding the ongoing TNT Express integration, Smith said the process is going smoothly and according to plan.

FedEx is in support of the Trans-Pacific Partnership, which the president-elect has said he will withdraw from on Day One. FedEx's chief executive recently spoke with CNBC about improving the trade deal. He also discussed the effect that protectionist policies could have on the company.

Another factor to consider is the impact of lower fuel costs. Although the decrease in prices would reduce costs for FedEx, it also means the shipping company misses out on fuel surcharges that bolster revenue.

On its conference call, FedEx may address any concerns investors and analysts have about weather delays affecting service in certain areas. The company put out a service alert Tuesday morning explaining that it is closely monitoring winter storms across the country.

FedEx has contingency plans in place, it said, to ensure the safety and well-being of its team members, as well as to minimize the effects of the storms.

The stock is up nearly 33 percent year to date, and is one of the best performers in the transports sector. 

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