) -- Expectations are not high for
(FDX - Get Report)
, which on Wednesday will report earnings for the fiscal third quarter ended Feb. 28.
Analysts surveyed by Thomson Reuters estimate per share earnings of $1.39, excluding items, down from $1.55 in the same period a year earlier. They expect revenue to climb 3% to $10.9 billion. FDX and
(UPS - Get Report)
results are considered to be accurate economic indicators because so much of the economy depends on overnight delivery to consumers and businesses.
"When FedEx reports its fiscal 3Q tomorrow, we expect another lackluster number, but investors will likely be focused beyond the EPS figures as 2013 represents a restructuring year," wrote Sterne Agee analyst Jeff Kauffman in a report issued Tuesday.
"Sluggish growth globally, a modest domestic B2B market and higher fuel and weather costs in this quarter versus last year" will weigh on earnings, Kauffman wrote.
On the plus side, he said, the increased third-quarter costs "will bear fruit in 4A13, driving margin expansion from attrition of the workforce and lower selling, general and administrative costs." FedEx expects a fourth-quarter charge of around $600 million from a voluntary employee buyout initiative, which should drive $300 million of annual savings starting in 2014, he said.
Kaufman expects improving volumes in Asia, the U.S. and emerging markets. He expects investors will focus on the improving markets and the restructuring progress, rather than on the EPS decline. "We sense improved optimism among investors, given the improved global growth outlook, so long as the restructuring is moving forward," he wrote. "Very few investors we speak with are short-term focused on FDX right now, so it's more the direction of the trends that should matter to investors on this call."
In early afternoon trading, FedEx shares were down 96 cents to $106.33, while UPS shares were down 42 cents to $75.09. Shares in both overnight package delivery companies are up about 13% for the full year.
-- Written by Ted Reed in Charlotte, N.C.
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