Week in Preview: Economic Data and Earnings From Bellwether FedEx

Federal Express
Federal Express

Last week, the Fed's Beige Book report confirmed that the economy continues to grow, but at a slower pace than in previous periods. This week will bring other economic data to either support or contrast with the Fed's findings.

  • Monday: Federal government budget balance for August

  • Tuesday: Business inventory numbers from July, TIPP Economic Optimism Index for September, retail sales data from August

  • Wednesday: Industrial production in August, Empire State Manufacturing Survey for September, import price index for August

  • Thursday:Producer price index for August, Philly Fed Survey for September, the current account balance in the second quarter, jobless claims for last week

  • Friday: preliminary University of Michigan Consumer Sentiment Index, consumer price index for August, real earnings data for August

The View from FedEx

FedEx (FDX) is generally seen as an economic bellwether these days, so its fiscal first-quarter report this week will offer another data point about the most recent quarter. Analysts surveyed by Thomson Reuters anticipate that Memphis-based FedEx will report that its earnings doubled from a year ago to $1.19 per share, in line with previously raised guidance.

During the three months ended in August, FedEx and declared a quarterly dividend, and revenue for that period is expected to total $9.4 billion, up 17.4% year over year. And the consensus forecast calls for sequential and year-over-year growth of both earnings per share and revenue in the second quarter. FedEx met or beat earnings expectations in the past five quarters.

FedEx has a long-term EPS growth forecast of 12.3% and a forward price-earnings (PE) ratio is 16.2, which is less than the industry average and the trailing PE ratio of 22.4. The First Call recommendation has been to buy FDX for more than 90 days. The mean price target is currently $98.89. The stock hit a 52-week low of $69.78 in July but ended last week at $84.16.

Expectations for Best Buy

During the three months that ended in August, Best Buy (BBY) named a chief design officer and increased its quarterly dividend. The nation's largest consumer-electronics retailer is expected to post EPS of 46 cents, which is a 19.6% increase from a year ago. Second-quarter revenue is expected to have grown 5.7% to $11.7 billion.

So far, analysts predict sequential and year-over-year growth of both EPS and revenue in the third quarter. Earnings results have topped consensus estimates in two of the past three quarters, but missed by 13 cents per share in the first quarter.

Best Buy's long-term EPS growth forecast of 11.9% is better than that of Wal-Mart Stores (WMT), and its forward PE ratio of 9.7 is less than the industry average. Its net cash flow from operations swung to the black in the most recent period. Analysts on average recommend buying BBY, and their mean price target is $45.65. Shares are 9.2% lower than three months ago and closed Friday at $40.35.

Oracle's Strong Revenue Results

Enterprise software giant Oracle (ORCL) announced a note offering during its fiscal fiscal quarter. Analysts are looking for earnings to total 36 cents per share, a 16.7% increase from a year ago. Revenue for the three months that ended in August is expected to come to $7.3 billion, or 43.7% more than in the same period of fiscal 2010.

Looking ahead to the second quarter, analysts foresee sequential and year-over-year earnings and revenue growth. The per-share earnings results have not fallen short of analysts' expectations in the past five quarters.

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Oracle's long-term EPS growth forecast of 12.4% is better than the industry average and that of Hewlett-Packard (HPQ). The 13.2 forward PE ratio is less than industry average and the trailing PE ratio of 14.9. This dividend-payer's net cash flow from operations has grown in recent periods. The consensus recommendation remains to buy ORCL, and the mean price target is $29.37. At $25.05, shares are 10.4% higher than three months ago but less than the 52-week high of $26.63.

Others scheduled to post earnings results this week include Cracker Barrel Old Country Store (CBRL), Dress Barn (DBRN), Kroger (KR), Pall Corp. (PLL), Pier 1 Imports (PIR) and Research In Motion (RIMM).