Wanna See How Fast Market Sentiment Has Reversed? Dig Deeper Into FedEx

AP Fedex Golf

Arguably, the catalyst that really moved US stocks forward in Monday trading was the positive earnings pre-announcement from FedEx.

But it wasn’t quite so simple, since the company itself also recently lowered guidance.

BTIG’s Mike O’Rourke explains the recent history:

We have discussed the influences of sentiment and expectations all month, and today provided two excellent examples of expectations imbalances within the markets.  The first is FedEx.  On June 15th, FedEx shares closed at $83.01.  On the morning of June 16th, the company announced earnings and provided initial guidance for 2011 of $4.70 per share below street expectations of $5.07.  The stock dropped nearly 6% that day despite a very upbeat conference call by management.  A sloppy broad market fuelled an additional sell of FedEx shares over the next couple of weeks.  As the market bounced so did FedEx and last week the rally continued on good earnings news from competitor UPS.  Today, a mere 6 weeks after that initial guidance, FedEx raised 2011 expectations to $4.90 per share based upon Q1 looking 15% better than expectations.  FedEx Shares closed today at $83.39, higher than the June 15th close.  It is remarkable that the company has managed to bring expectations down by $0.17 and subsequently wind up with a higher share price.  For the time being since the revision has been upward, as have those of the competition, the market will likely expect future announcements to go in the same direction.  One might be tempted to call this chicanery, but we have seen them do the same exercise in reverse in the past.  Regardless, the actions and results merit being mindful of them.

For a roundup of the US trading day, see here >

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