FedEx Completely Screwed Up Their Guidance... But Check Out Their V-Shaped Recovery

Fedex shares are under pressure today since the company surprisingly issued cautious guidance for the next quarter, below analyst expectations. Just after becoming more bullish just a few days ago.

FedEx: FedEx expects earnings per share of $0.50 to $0.70 per diluted share in the third quarter, and $3.45 to $3.75 for fiscal 2010, which reflects the current market outlook for fuel prices and a continued modest recovery in the global economy.

It’s quite a U-turn. This latest guidance is well below analyst estimates of $0.84 for the quarter. Yet we need to be clear that this guidance that was raised across the board just recently. According to Yahoo Finance, 11 out of 11 FedEx analysts (tracked by Yahoo) increased their guidance in the last seven days.

So what happened? Analysts became too bullish on FedEx just a few days ago, upped their numbers, the shares rallied, and now it’s been laid bare as pretty silly.

But…while the question as to whether FedEx shares are cheap or expensive remains open to debate, investors as a whole shouldn’t read too much into FedEx’s guidance slip-up.

That’s because beneath the market noise today for FedEx shares, FedEx’s underlying data from the latest quarter shows a continued recovery in both their U.S. Express and Ground package volumes.

Check out the chart below — here’s a V-shaped recovery.
[image url="" link="lightbox" caption="" source="" alt="FDX" align="left" size="xlarge" nocrop="true" clear="true"]
Growth of FedEx Express U.S. package volumes has accelerated. (Note that FedEx’s fiscal Q2 2010 represents the quarter ending November 30th, 2009: essentially the 4th quarter of 2009)

While not shown as a graphic, FedEx Ground volumes also grew 3.7% in the latest quarter.

Thus from a broader U.S. economic perspective, the latest FedEx results were positive. The chart above is clearly a ‘V’. Hopefully it continues to be.

Check out today’s FedEx’s earnings release here.

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