FedEx Earnings Deliver Insight to Potential Weakening of Global Demand

FedEx (Ticker Symbol: FDX) the largest deliverer of e-commerce and one of the largest air freight carriers globally, reported weaker than expected earnings, revenue, and guidance after the close on Tuesday. FedEx reported earnings per share of $3.03 vs. $3.11 expected and revenue of $17.01 billion vs. $17.67 billion expected.  The company also reduced its 2019 full-year guidance for a second time, adding additional pressure to the shares. FedEx shares opened at $172.75, down -4%, this morning.

FedEx cited the reasons for declining revenue, especially internationally, was a result of the negative effects of trade wars and unfavorable exchange rates. Executives within the company stated that the results were below their expectations and said the company is focused on ways to improve its future performance. FedEx has taken some actions by limiting “discretionary spending”, constrained hiring, and beginning a voluntary employee buyout program.

Shares of FedEx and United Parcel Service, (Ticker Symbol: UPS) its major competitor, have been under pressure for months before the news came out of FedEx’s disappointing earnings, revenue, and guidance, possibly signaling weaker global growth.

FedEx’s stock price ticked to an all-time high at $174.66 early into the first quarter of 2018.  The stock peaked and then proceeded to begin a downtrend, making a series of lower highs over the course of the next 12 months.  On the bottom of the chart is the Relative Strength Index, highlighted in purple.  Traders can use this indicator to help determine if a stocks price has reached overbought or oversold levels.

FedEx has had four price corrections in the past year, (purple circles in the chart) all of which saw an oversold reading in the Relative Strength Index. (RSI) The fourth came at the beginning of the first quarter of 2019.  FedEx’s stock started off to the year with a great start rallying more than 15% in January alone.  It has since retreated from those levels and after yesterdays disappointing news, it’s possible FedEx could continue lower and test the lows it made in 2018, just near the $150.00 level.  Conversely, a move higher above this year’s highs at 186.10 and above the 100-day Moving Average around $190.00, could give it some upside price potential for investors.

(Chart courtesy of www.tipranks.com )

Based on a survey of 18 analysts across Wall Street, the average price target for FedEx’s stock is 208.89.  Based on that number, the stock is priced at a discount relative to Wall Street’s analysts. FedEx’s stock is currently trading at 175.07.

Currently, there is a very large divergence between the stock market and FedEx’s stock.  The S&P 500 is down just over 4% from its all-time high, while FedEx’s stock is down over 35% from its all-time high!  Investors look at FedEx for signals in global growth or deceleration because it is a major carrier for all different types of global industries. FedEx’s major competitor, United Parcel Service, reports its earnings on April 25th, 2019.  Hopefully, we will see if UPS’s earnings can paint a brighter picture for global growth than FedEx’s did.

 


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