Why Markets May Be Reading The FedEx Earnings Completely Backwards


FedEx (FDX) shares are slipping right now, after the company missed quarterly earnings expectations by a penny.


Yet while everyone should do their due diligence, but shooting from the hip, the market could be trading FedEx the wrong way right now. Why?

1) FedEx just raised their 2011 guidance to $4.80 – $5.25 per share from $4.60 – $5.20. Thus the lower end has increased substantially, and the mid-point is at $5.025, up from $4.90.

2) FedEx also expects strong performance through the end of the year and forecasts margin expansion. The company announced 1,700 staff reductions, but this is part of its margin expansion effort.

“We expect continued strong demand for our package transportation services through at least December,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “Shippers of high value-added goods, especially in the technology sector, know that we have unmatched air express capacity to deliver quickly and reliably for them, even when demand surges. We expect the yield improvement initiatives we have underway, coupled with the current high utilization of our planes, vehicles and facilities, will drive higher earnings, margins and returns.”

3) FDX shares remain well below the $95 level they broke just during April of this year. From a trading perspective, it won’t take much to send them right back. If what FedEx is currently seeing holds, then the economic outlook from back in April is still intact.

Disclaimer: This is not an investment recommendation, and everyone should do their own complete due diligence. The author or his associates could have exposure to any security mentioned at any time.

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