Why the Profit on FedEx Corporation Stock?
catalysts mentioned in the initial recommendation – found further below in this
article – the stark warning from FedEx Corporation (NYSE:FDX) on Thursday on how business conditions
continue to deteriorate, and then withdrawing its full-year guidance while CEO
Raj Subramaniam warned that global volumes “significantly worsened” and are
likely to decline even further.
analysts were greatly disappointed with FedEx Corp.’s forecast for the current
quarter and its withdrawal of full-year guidance.
at Deutsche Bank AG said it’s the worst report they’ve seen in two decades.
“FedEx preannounced last night the
weakest set of results we’ve seen relative to expectations in our ~20 years of
analyzing companies,” the bank’s
analysts including Amit Mehrotra said in a note to clients.
delivery giant said in a statement Thursday night that it expects first-quarter
earnings, excluding some items, to be $3.44 per share, or roughly 33% below the
average analyst estimate of $5.10. In addition, FedEx withdrew its earnings
forecast for 2023, saying macroeconomic trends have “significantly worsened,”
both internationally and in the US, and are likely to deteriorate further,
fueling fears of a broad-based earnings decline.
covering the stock lowered their recommendations on FedEx Friday, as the stock
sank as much as 24% before finishing the day down 21%. Robert W. Baird &
Co. analyst Garrett Holland summed up the opinions, calling it an “ugly
quarter.” The bleak outlook pushed shares of rival United Parcel Service Inc.,
e-commerce giant Amazon.com Inc. and European delivery companies well into the
warning came as a slap. It’s a solid sign that the economy started slowing,”
said Ipek Ozkardeskaya, a senior analyst at Swissquote. “This is certainly the
first in a series of warnings that we may see for the quarters to come.”
America Corp.’s Michael Hartnett said in a note Friday that an earnings
recession will likely drive US stocks to new lows, while Deutsche Bank
strategists have said that company profits are set to drop, putting the S&P
500 at risk of a much deeper selloff.
Friday, the University of Michigan sentiment index showed inflation
expectations for the next 12 months were the lowest since July 2021.
begun to write off a 75-basis point hike as an inflation-fighting measure when
the Federal Reserve meets next week. Investors now see a 83% chance of a
75-basis-point hike vs. a 17% likelihood the Fed will boost rates by a full
The Profits Explained.....
Entered the FedEx Corporation stock trade
on Tuesday, September
07, 2022 at $7.70.
Exited the trade Friday, September 17 for $44.73, for
a potential profit of 481%.
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Why the Initial Weekly Options Call Trade on
FedEx Corporation Stock.....
sank lower in a choppy post-Labor Day session Tuesday as traders remained on
edge ahead of the Federal Reserve's next policy move later this month.
benchmark S&P 500 fell 0.4%, while the Dow Jones Industrial Average
declined by 0.5%, or about 170 points. The tech-heavy Nasdaq Composite led the
declines, tumbling 0.7%. The moves come after three straight weeks of losses
for the major averages.
marked its seventh-consecutive loss as tech slipped, marking its longest losing
streak since 2016.
Corporation (NYSE:FDX) was downgraded by analysts at
Citigroup Inc. from a "buy" rating to a "neutral" rating.
They now have a $225.00 price target on the stock, down previously from
$270.00. This represents a 9.7% upside from the current price of $205.07.
across equities resumed following the release of fresh data that showed U.S.
services activity gained momentum in August, a sign to investors that Fed
officials may proceed with a heftier rate increase of 75 basis points September
Institute for Supply Management reported its non-manufacturing PMI rose to a
reading of 56.9 last month from 56.7 in July, the second straight monthly
increase ofter a three-month decline.
Corporation provides transportation, e-commerce, and business services in the
United States and internationally.
company's FedEx Express segment offers express transportation, small-package
ground delivery, and freight transportation services; time-critical
transportation services; and cross-border enablement, technology, and
e-commerce transportation solutions.
Ground segment provides day-certain delivery services to businesses and
company's FedEx Freight segment offers less-than-truckload freight
transportation services. As of May 31, 2022, this segment had approximately
30,000 vehicles and 400 service centers.
Services segment provides sales, marketing, information technology,
communications, customer service, technical support, billing and collection,
and back-office support services.
company's Corporate, Other and Eliminations segment offers integrated supply
chain management solutions, specialty transportation, customs brokerage, and
global ocean and air freight forwarding services; and document and business
services, as well as retail access to its customers for its package
Corporation was founded in 1971 and is based in Memphis, Tennessee.
Further Catalysts for
Citi's Christian Wetherbee recommended a so-called "pair
trade," whereby investors buy UPS and short FedEx. In other words, even if
UPS stock falls, FedEx will likely fall even more, and investors will still
make money from the trade.
Wetherbee's rationale is that the deteriorating macroeconomic
environment will lead to weakening volumes at FedEx and UPS, and the latter is
better positioned to deal with it.
There's logic to the argument that UPS is better positioned than FedEx.
After all, UPS is already being more selective about its deliveries. As a
result, the company is generating more revenue and profits even as its volume
However, the point that concerns investors about the analyst's note is
the commentary on a weakening economy.
A former FedEx Corp delivery contractor on Tuesday called for a
no-confidence vote by contractors against FedEx Ground Chief Executive John
Smith, escalating a conflict with the parcel delivery firm.
Patton ratcheted up pressure on FedEx to boost compensation for contractors
after company actions made it even harder for them to wring out a profit in a
downshifting, inflationary economy.
response, filed a suit against the contractor and severed ties with him. In its
lawsuit, the company alleged that Patton was disparaging its Ground business
through a series of false and misleading statements about its commercial
was one of the largest delivery contractors for FedEx, said contractors, would
be asked to anonymously answer a couple of questions and the data will be
reviewed by an independent global advisory firm.
Smith's leadership, small business owners operating FedEx Ground's network have
been increasingly burdened by extreme inflation costs and forced contract
changes," Patton said.
one-third of the small business contractor network has already, or will soon
need to, walk away from their FedEx Ground contract as high costs squeeze
profit margins, TALP said, without providing details.
announced its quarterly earnings results on Thursday, June 23rd.
service provider reported $6.87 earnings per share for the quarter, missing
analysts’ consensus estimates of $6.91 by ($0.04). The firm had revenue of
$24.39 billion during the quarter, compared to analyst estimates of $24.28
billion. FedEx had a net margin of 4.09% and a return on equity of 22.29%.
same quarter in the prior year, the business earned $5.01 earnings per share.
On average, research analysts predict that FedEx Co. will post 23.16 EPS for
the current fiscal year.
technical environment deteriorated last week, after the SPX fell below 4,230
and the 4,160-4,170 area… To add insult to injury, Friday’s action can be
classified as a bearish outside day, with the SPX’s intraday high above the
previous day’s peak and the low and close below the prior day’s low... possibly
the next level of potential support coming from the SPX’s 50-day moving average
at the round 4,000-millenium mark…Although this is an area of potential
support, bulls should not ignore the fact that risk has increased amid breaks
below higher levels of support amid the ‘bearish island reversal’ pattern last
Monday and the bearish outside day candlestick on Friday.
Wilson, the chief investment officer at Morgan Stanley, has argued that stocks
are fighting a toxic combination of economic headwinds—which he calls “fire”
and “ice”—that are set to keep equity prices subdued until late 2023.
market’s summer rally was cut short last month as investors digested a
reaffirmation of the Federal Reserve’s hawkish inflation-fighting stance around
the same time Europe’s energy crisis took a turn for the worse. But even after
a roughly 9% drop in the S&P 500 since mid-August, Wilson says buyers
should (still) beware.
In a Tuesday
research note, the CIO noted that his fire and ice moniker has “proven to be an
effective way to describe the first half of this year,” and he expects that
will continue to be the case through December.
For most of
this year, Fed policy makers have been sanguine toward markets like stocks,
preparing traders in advance (called “forward guidance”) for upcoming changes
to monetary policy. But that seems to be in the past. In July, Fed Chair Jerome
Powell announced that central bankers would stop practicing forward guidance.
the Fed wants to see tighter financial conditions, which include lower stock
prices,” Brian Overby, senior markets strategist at Ally, wrote in a note.
central bank has two mandates: price stability and maximum employment. Right
now, prices aren’t stable, with inflation running well above the Fed’s 2% goal.
Meanwhile, the unemployment rate is still low and employers are adding over
300,000 jobs per month. That’s great news for job seekers but, perversely,
something that could fuel inflation, raising pressure on the Fed to take even
stronger action.That spells potential trouble for markets like stocks and
wants to create a reverse wealth effect and get people that own assets to
rethink some of their purchase habits and maybe slow demand,” said Jim Bianco,
president of Bianco Research.
dangerous game,” he added. “You want the market to go down, but you gotta be
careful when that starts to happen because if you get everybody running for the
hills because they’re going to be the enemy of the market, you could turn it
into a rout.”
previously, a Citi analyst has downgraded shares of FedEx to neutral from Buy
as he sees the potential for macro headwinds to challenge earnings growth this
argues that FedEx is more long-term looking and its initiatives are mostly
focused on F24 and beyond. The new price target is $225, down from the prior
Ground volume has been weakening through F1Q and further macro weakness
(highlighted by mgmt in July and August) make DD EPS growth difficult even with
better pricing through peak,” the analyst said in a client note.
As far as
the wider North America Transport sector is concerned, Citi analysts are
concerned about the pace of freight activity. Along these lines, the analyst
sees upcoming data points leaning negative.
suggest peak TL freight is not materializing and the pace of imports is slowing
into what should be a strong seasonal period. TL spot rates have also taken a
recent leg lower and while rail carloads are holding steady, there is little
evidence of improvement and we see risk to 4Q estimates building,” the analyst
According to the issued ratings of 20
analysts in the last year, the consensus rating for FedEx stock is Moderate Buy
based on the current 5 hold ratings and 15 buy ratings for FDX. The average
twelve-month price prediction for FedEx is $294.75 with a high price target of
$339.00 and a low price target of $225.00.
ahead, in two weeks we have a standard expiration that occurs in the final
month of the quarter and the regular quarterly expiration on September 30.
These end of quarter expiration months (March, June, September and December),
from experience, tend to have the biggest open interest builds relative to
months where it isn’t an end of the quarter. The implication is that with more
put open interest on equity index and exchange-traded fund options, in periods
of market weakness, there could be more selling related to big put open
interest strikes. This could happen whether those puts were bought as a hedge
or to speculate.
You should be on high alert for the potential of a severe, sharp decline
these next two weeks as long as the SPY remains below the 400-strike. This is
especially if it dips below the 390-strike
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