With the increasingly regular announcements of layoffs and plant closings, it's clear that the recession is deepening. One clue to the economy's future direction that investors may be watching for is the upcoming earnings release of FedEx Corp. (NYSE: FDX). The world's largest delivery service has been considered an economic bellwether, and it just may have benefited recently from lower fuel prices and the announced departure of rival DHL from the U.S. package market.
For the company's fiscal second-quarter 2009 report, analysts surveyed by Thomson Reuters on average expect to see earnings of $1.57 per share, about 2% higher than in the year-ago period, and 21.7% higher than in the previous quarter. That's about the same as the $1.58 per share FedEx forecast in preliminary results last week. Analysts expect revenues for the quarter ended November 30 to total $9.8 billion, 3.9% more than a year ago. The Memphis-based company has only fallen short of earnings expectations in one of the past five quarters, and exactly matched estimates back in the first quarter.
As part of its expansion plans, FedEx broke ground on a new Portland hub in October, and said that a new facility in China will be fully operational in the first half of 2009. The company continues to make service improvements, and declared a quarterly dividend in November. But in its preliminary results, FedEx lowered its full-year forecast, citing continued weakness in the economy.
The forecast long-term growth rate for the world's largest delivery service is 12.8%, which is better than that of the S&P 500, and about the same as that of rival United Parcel Service (NYSE: UPS). But the consensus recommendation of analysts has shifted from buy to hold during this past quarter. The share price has fallen 32.5% in the past three months, and reached a multiyear low of $53.90 in late October.
BlackBerry maker Research In Motion Ltd. (NASDAQ: RIMM) is expected to be one of the highest earnings gainers among companies scheduled to report results this week. Analysts are looking for the Ontario-based company to report fiscal third-quarter earnings of $0.81 per share, 19.8% higher than a year ago, on revenue of $2.8 billion (+68.8%), higher than RIM's recent forecast. But RIM missed earnings estimates in the previous two quarters, and shares have fallen 63.3% in the past three months.
This week will see reports from big earnings decliners as well. Among those are Discover Financial Services (NYSE: DFS), which recently reached a settlement with rivals Visa Inc. (NYSE: V) and MasterCard Inc. (NYSE: MA), and Best Buy Co. Inc. (NYSE: BBY), whose biggest rival, Circuit City Stores Inc. (NYSE: CC), recently filed for bankruptcy. Discover is expected to post a fourth-quarter profit 65.0% lower than a year ago, or $0.14 per share, on revenue of $728.7 million (-27.9%). Best Buy is expected to report fiscal third-quarter earnings of $0.25 per share, down 52.8% from a year ago, on revenue of $11.1 billion (+12.2%). Both companies have offered positive surprises in recent quarters, except that Best Buy missed estimates by 9 cents in its previous quarter. Shares of both companies fell to multiyear lows in November, and they are down more than 45% from three months ago.
Among companies expected to report quarterly losses this week is Goldman Sachs Group Inc. (NYSE: GS). The New York-based company had so far managed to hang on through the financial crisis while competitors such as JPMorgan Chase & Co. (NYSE: JPM) and Merrill Lynch & Co. Inc. (NYSE: MER) struggled or collapsed. But analysts expect Goldman Sachs finally to have swung to its first loss ever in its fourth quarter. The forecast of a $3.50 per share loss is less than Goldman had warned it could be, and compared to a per-share profit of $7.01 in the same period a year ago. Revenues are forecast to have fallen 91.3% to $931.6 million. The investment bank regularly offers positive surprises, by as much as 34.1% in the past year, but will that streak end as well? Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A) recently took a big stake in Goldman Sachs, and shares are well above the recent 52-week low of $47.41, but are down 56.1% in the past three months.
Morgan Stanley (NYSE: MS), on the other hand, is expected to post a narrower loss of $0.37 per share, as compared to the year-ago loss of $3.61 per share. Revenues, however, are expected to be 944.1% lower, or $3.8 billion. Still, the investment bank has topped earnings estimates in the past three quarters. The consensus recommendation of analysts is to buy MS, and the share price is 62.8% lower than it was three months ago.
In what might be a good sign for the housing sector, if not the economy, homebuilders Lennar Corp. (NYSE: LEN) and Hovnanian Enterprises Inc. (NYSE: HOV) are also expected to report much narrower fourth-quarter losses of $0.79 per share and $1.67 per share, respectively. However, both companies have posted deeper-than-expected losses in recent quarters.
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