11:26 AM EDT, 09/03/2024 (MT Newswires) -- FedEx ( FDX ) is on track to post fiscal first-quarter results below consensus views later this month due to misses in its ground and express businesses, Morgan Stanley said on Tuesday.

The brokerage is modeling for adjusted earnings per share of $4.69, which is about 6% below Wall Street's $4.98 view. Morgan Stanley expects the parcel delivery company's earnings before interest and taxes, or EBIT, to come in 4% below consensus, driven by softness in express and ground operations that would be partially offset by a beat in freight.

FedEx ( FDX ) is scheduled to report its latest quarterly results on Sept. 19.

The brokerage is forecasting first-quarter EBIT of $252 million in express, below the $261 million consensus, due to softer-than-expected revenue and margins. Morgan Stanley expects the division's revenue to be flat year over year, while the market is modeling for modest growth.

"We see little signs of acceleration in the macro backdrop which has been a headwind to results in recent quarters with key macro datapoints lingering at fairly tepid levels," Morgan Stanley wrote in a note. It reiterated an equal weight rating and a $215 price target on the stock.

For ground operations, Morgan Stanley's $1.02 billion EBIT estimate is 2% lower than the consensus view. The brokerage's expectation for flat ground revenue is 2% below the consensus and marks a sequential deceleration amid a more difficult comparison and one fewer working day within the commercial segment.

In freight, Morgan Stanley is 5% above consensus with EBIT of $523 million in what the brokerage expects will be an "execution driven beat" reflecting revenue quality initiatives. Tonnage trends remain mixed among less-than-truckload peers, though Morgan Stanley expects such dynamics to become more difficult as the industry laps the fallout from trucking company Yellow's last year bankruptcy.

For the full year, Morgan Stanley's adjusted EPS target of $15.84 is "materially below" the consensus forecast and FedEx's ( FDX ) $20 to $22 guidance, according to the brokerage's note. Analysts in a Capital IQ survey are modeling for normalized EPS of $21.10 for fiscal 2025.

The stock's performance this quarter will likely "entirely hinge" on management's guidance, Morgan Stanley wrote. The second quarter's results could be pressured by Cyber Monday being pushed into the third quarter, "as well as a more compressed peak season" and the upcoming termination of the US Postal Service contract at the end of September, according to the note. Cyber Monday, however, will help the third quarter.

The company is facing tougher comps tied to its DRIVE cost-savings program. These factors, combined with other items, could drive "significant earnings volatility relative to expectations," Morgan Stanley wrote.

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