IS THE GLOBAL ECONOMY REBOUNDING?
FedEx raised their guidance this morning citing stronger demand and cost cuts. Specifically, they said international demand was stronger than expected:
FedEx expects earnings to be $0.65 to $0.95 per diluted share in the second quarter, which reflects the current outlook for fuel prices and a continued modest recovery in the global economy. A substantial decline is expected from $1.58 per diluted share a year ago, as the company significantly benefited from rapidly declining fuel prices and the timing lag that exists between when fuel prices change and when indexed fuel surcharges automatically adjust.
“FedEx first quarter financial performance exceeded our guidance thanks to better-than-expected FedEx International Priority® volume, strict cost management and solid execution of our strategy,” said Alan B. Graf, Jr., FedEx Corp. chief financial officer. “Despite some encouraging signs in the global economy, it is difficult to predict the timing and pace of any economic recovery. Revenue per shipment declined year over year in each of our transportation segments, as fuel surcharges declined significantly and we continue to face a very competitive pricing environment combined with significant overcapacity in the LTL freight market.”
It’s impossible to view this as anything other than an overwhelming positive for stocks. Transports are very economically sensitive and any positive signs in volumes means demand is on the rise. It is, however, important to note that FDX is expecting earnings to be off 53% versus last year. Meanwhile, the stock is roughly flat compared to last year. With earnings collapsing and the stock market acting as if the credit crisis never occurred you have to start wondering at what point the market is well ahead of itself with these massive declines in earnings and revenues?
Hi TPC, what is your current outlook for the likelihood for a pull back this month? Thanks in advance.
Paul,
I am having trouble finding a catalyst that takes us down now. My biggest concern is that we overshoot to the upside now. I have been wrong for the last 5% of this move. Thankfully, I have been overweight bonds and cash as opposed to outright short.
The next earnings season is right around the corner and my preliminary work shows that analysts are way behind the curve again….
In ‘08 FDX was around $100/share – 53% drop in EPS and they trade today at $78/share – if things don’t make sense then they don’t make sense. Just like tech stocks in the 90s – the numbers don’t support the price.
so TPC, you think they have lower target estimates like past Q?
therefore there could be more upside as we saw during 2q season.
Teomax,
I will not be short into earnings. I’ll be out with a detailed report in the next few weeks. We’re seeing pretty similar trends continuing from recent quarters….
Thanks TPC. Techicals are so strong, 1,060 to 1,100 is very possible though hard to believe due to dip buyers. Low treasury yields saying something differently. Meredith Whitney said Fed exit strategies in October could change, will you take this into consideration along with earnings in your future outlook?
FDX PEG = 2.59
PEG ratio results greater than 1 suggest one of the following:
* Market expectation of growth is higher than consensus estimates.
* Stock is currently overvalued due to heightened demand for shares.
re:FDX PEG = 2.59
I haven’t looked in detail at FDX financials for several years, but I wonder if the PEG “premium” is also justified because of low interest rates (Fed model of investor’s valuations) as well as the said low cost of capital for a high quality (?) credit like FDX (which probably also relies on large working capital).
Profit’s are benefitting from oil price (e.g. weak demand in total economy lowering oi prices) and some increase in demand from their.
Economy still brittle to oil price shocks! GS is betting on higher oil prices and a rebound in the economy. One of those bets can’t happen.
MARKET QUOTES
THIS WEEKS MOST POPULAR STORIES
MARKET NEWS
© 2009 pragcap.com · Login.
Home · Advertise · Contact us · Disclaimer ·