stocks

FedEx Stock: Will FDX Earnings Deliver the Goods?

Our preview of the upcoming week's earnings reports includes FedEx (FDX), Adobe (ADBE) and Darden Restaurants (DRI).

We're at the tail end of earnings season and the list of names reporting this week is thin. Still, of those remaining on the earnings calendar, results from shipping giant FedEx (FDX, $246.79) will certainly be in focus amid global supply-chain disruptions.

The stock has struggled on the charts since peaking near the $320 per-share mark in late May. However, since bottoming at a 52-week low around $216 in early October, FDX is up roughly 14%.

Can a solid earnings report keep the wind at FedEx's back?

The company is slated to report its fiscal second-quarter results after Thursday's close. Analysts, on average, are calling for earnings of $4.25 per share, down 12% on a year-over-year (YoY) basis. Revenue, meanwhile, is expected to arrive at $22.44 billion, an 8.9% improvement over the year prior.

Baird Research analyst Garrett Holland has an Outperform (Buy) rating on FedEx ahead of earnings. "Quarter-to-date trends have been tracking largely as expected as supply-chain challenges have weighed on volume growth," he says. 

But pricing strength remains strong and could be further elevated should COVID-19 disruptions – most recently the omicron variant – continue in 2022, he adds. As such, he remains an "opportunistic buyer of transports."

Morgan Stanley analyst Ravi Shanker isn't so sure. He has an Equal Weight rating on FDX, which is the equivalent of a Hold. 

Shanker thinks that while "an ongoing recovery and strong consumer should remain supportive of topline results," he expects FedEx to report adjusted earnings of $3.84 per share – below the consensus estimate – as "labor availability issues that weighed on results last quarter are likely to remain both a productivity and cost headwind." 

He also believes the cuts FDX made last quarter to its full-year guidance were not steep enough and sees "risks to fiscal second-quarter and fiscal 2022 numbers as pandemic tailwinds die down."

For the full fiscal year, Shanker is targeting for earnings per share (EPS) of $18.49, which is lower than analysts' consensus estimate for earnings of $19.62 per share.

Bullish Analyst Eyes "Healthy Upside" for Adobe Earnings

Adobe (ADBE, $642.38) will also step into the earnings confessional after Thursday's close to unveil results for its fiscal fourth quarter.

Analysts are certainly upbeat toward ADBE. Of the 31 pros following the stock tracked by S&P Global Market Intelligence, 18 have a Strong Buy rating, eight call it a Buy and five say Hold.

One of those with a Buy rating is Mizuho Securities analyst Gregg Moskowitz. Looking ahead to earnings, he believes the maker of Photoshop and Acrobat "is very well-positioned to benefit from digital transformation with its highly comprehensive end-to-end offering that differentiates it from competitors and should enable it to drive more holistic sales across its clouds." 

He cites favorable quarterly checks from the research firm that he thinks will lead to "healthy upside" to Street estimates.

As for those Street estimates, the pros, on average, are projecting a 19.3% year-over-year pop in revenue to $4.09 billion. This should fuel a 13.9% rise in earnings to $3.20 per share, they say.

Analysts See Strong Earnings Growth for Darden Restaurants

Olive Garden parent Darden Restaurants (DRI, $151.65) is the lone name reporting earnings on Friday, with its fiscal second-quarter results due out ahead of the open.

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The company reported stronger-than-anticipated earnings and revenue in September, sending its stock up 6.1% in reaction – and to (what was at the time) a new record closing high of $159.50.

"We are growing more confident in Olive Garden's sales upside potential and DRI's apparent better visibility into inflation outlook is encouraging," said BMO Research analyst Andrew Strelzik after the report was released. However, he maintained his Market Perform (Hold) rating, saying "a balanced risk/reward keeps us on the sidelines."

Since its last earnings report, DRI stock's performance on the chart has been choppy, though shares are currently up 10% for the month-to-date.

Another positive earnings report could help Darden Restaurants end the year on a high note. For the company's fiscal first quarter, the consensus estimates are for earnings of $1.44 per share (+94.6% YoY) and revenue of $2.23 billion, a 134.4% improvement over its year-ago results.

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