Earnings Week Ahead: Lennar, Autozone, FedEx, Nike and Costco Wholesale in Focus

Earnings Calendar For The Week Of September 20

Monday (September 20)

IN THE SPOTLIGHT: LENNAR

Lennar Corp, a home construction and real estate company, is expected to report earnings per share of $3.27 in the fiscal third quarter, which represents year-over-year growth of over 54% from $2.12 per share seen in the same period a year ago.

The Miami, Florida-based company would post year-over-year revenue growth of nearly 24% to around $7.3 billion. For four quarters in a row, the company has exceeded expectations on earnings per share.

“Shares of Lennar have outperformed the industry so far this year. The company is benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage. Higher demand for new homes backed by declining mortgage rates and low inventory levels bodes well. Focus on the lighter land strategy to boost free cash flow will bolster the balance sheet and thereby drive returns,” noted Analysts at ZACKS Research.

“Moreover, it has provided strong fiscal Q3 homebuilding gross margin guidance, suggesting 420 basis points (bps) increase at mid-point. Also, it has lifted average selling price and margin expectation for fiscal 2021, indicating 6% and 400bps year-over-year growth. However, higher land, labor and material costs are concerning. This may exert pressure on the company’s upcoming quarters as well.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 20

Ticker Company EPS Forecast
LEN Lennar $3.27
HRB H&R Block -$0.34

 

Tuesday (September 21)

IN THE SPOTLIGHT: AUTOZONE, FEDEX

AUTOZONE: The Memphis, Tennessee-based auto parts retailer is expected to report its fiscal fourth-quarter earnings of $29.71 per share, which represents a year-over-year decline of about 4% from $30.93 per share seen in the same period a year ago.

Autozone (AZO) is our top pick in DIY Auto. We see it as a high-quality retailer with the ability to compound earnings/FCF growth over time. While not immune to a tougher macro backdrop (fewer miles driven), we believe AZO is best positioned through any recession given its leading exposure to the more defensive DIY segment (~80% of sales). In addition, its DIFM growth was accelerating pre-COVID and we think it can gain more share in that segment going forward. In our view, ongoing share gains coupled with solid expense management should allow AZO to overcome headwinds from less driving in the near- to medium-term. These advantages seem priced in currently.”

FEDEX: The Memphis, Tennessee-based multinational delivery services company is expected to report its fiscal first-quarter earnings of $5.00 per share, which represents year-over-year growth of about 3% from $4.87 per share seen in the same period a year ago.

The delivery firm would post revenue growth of about 13% to $21.8 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 28%.

“August quarter remained strong, although we are seeing some delays in shipments, which we expect management to address,” noted Helane Becker, equity analyst at Cowen.

“We are approaching the peak shipping season and expect to see ~50K new hires to handle what is likely to be record demand. Looking ahead, FedEx (FDX) should finally finish the TNT integration; European operations should show that.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 21

Ticker Company EPS Forecast
AZO AutoZone $29.71
FDX FedEx $4.94
ADBE Adobe Systems $3.01
KGF Kingfisher £12.20
CBRL Cracker Barrel Old Country Store $2.33
NEOG Neogen $0.16

 

Wednesday (September 22)

Ticker Company EPS Forecast
KBH Kb Home $1.61
FUL HB Fuller $0.79
BBBY Bed Bath & Beyond Inc. $0.52
UNFI United Natural Foods $0.80
GIS General Mills $0.89

 

Thursday (September 23)

IN THE SPOTLIGHT: NIKE, COSTCO WHOLESALE

NIKE: The world’s largest athletic footwear and apparel seller is expected to report its fiscal first-quarter earnings of $1.12 per share, which represents year-over-year growth of about 18%, up from $0.95 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 18% to $12.6 billion.

“Investors are focused on the Vietnam factory closures impact on FY revenue guidance. Our analysis & mgmt guidance conservatism suggests minimal risk. But high valuation requires beat & raise quarters – stock price pullback possible & we’re buyers on any weakness. Reiterate Overweight; raise price target to $221,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

Nike (NKE) trades at the high end of its historical valuation range, & investors expect quarterly beats & guidance raises. Unchanged or lowered FY guidance on temporary, Vietnam-driven headwinds could result in a stock pullback. We would be buyers on any potential weakness.”

COSTCO WHOLESALE: The world’s fifth-largest retailer is expected to report its fiscal fourth-quarter earnings of $3.56 per share, which represents year-over-year growth of over 1.4% from $3.51 per share seen in the same period a year ago. The Fridley, Minnesota-based medical company would post revenue growth of about 18% to around $63 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE SEPTEMBER 23

Ticker Company EPS Forecast
ACN Accenture $2.18
DRI Darden Restaurants $1.64
NKE Nike $1.12
COST Costco Wholesale $3.56
MTN Vail Resorts -$3.46
PRGS Progress Software $0.82

 

Friday (September 24)

Ticker Company EPS Forecast
CCL Carnival -$1.43
CUK Carnival -$1.45
CCL Carnival -£1.45

 

Preview: What to Expect From FedEx’s Q1 Earnings on Tuesday

The Memphis, Tennessee-based multinational delivery services company FedEx is expected to report its fiscal first-quarter earnings of $5.00 per share, which represents year-over-year growth of about 3% from $4.87 per share seen in the same period a year ago.

The delivery firm would post revenue growth of about 13% to $21.8 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 28%.

The company’s next earnings report is expected to be released on Tuesday, Sep 21 after market close.

Analyst Comments

“After 18 months of topline focus, attention turns to costs in F1Q22 as FedEx (like most other companies) grapples with labour and general inflation. With revenues running into tougher comps + normalizing trends as well (particularly in Ground), results could be challenging for the 2nd successive quarter,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS.”

FedEx Stock Price Forecast

Twenty-one analysts who offered stock ratings for FedEx in the last three months forecast the average price in 12 months of $351.32 with a high forecast of $397 and a low forecast of $270.

The average price target represents a 35.97% change from the last price of $258.38. From those 21 analysts, 17 rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $270 with a high of $400 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Equal-weight” rating on the health care company’s stock.

Several other analysts have also updated their stock outlook. Evercore ISI lowered the target price to $350 from $360. Citigroup slashed the price target to $360 from $365. JPMorgan cut the target price to $346 from $366.

“August quarter remained strong, although we are seeing some delays in shipments, which we expect management to address,” noted Helane Becker, equity analyst at Cowen.

“We are approaching the peak shipping season and expect to see ~50K new hires to handle what is likely to be record demand. Looking ahead, FedEx (FDX) should finally finish the TNT integration; European operations should show that.”

Check out FX Empire’s earnings calendar

Better Times Ahead for Fedex Shareholders

Fedex Corp. (FDX) has given up 100% of 2021 upside since May and is now trading at the same price level first struck in January 2018, more than 44 months ago. It’s also trading below the 200-day moving average for the first time since June 2020, highlighting a stomach-churning fall from grace after last year’s impressive 76% return. It’s no coincidence that selling pressure surged when the Delta variant exploded in the United States, forcing economists to lower 2021 GDP projections.

High Odds for Rally Into Year’s End

Fortunately for shareholders, the packaging giant’s fiscal Q1 2022 report next week offers a perfect opportunity for the stock to turn higher and enter a sizable fourth quarter recovery. Analysts predict the company will post a profit of $5.04 per-share on $21.84 billion in revenue. If met, earnings-per-share (EPS) will mark a 3.5% profit increase compared to the same quarter last year. Fedex fell 3.6% after June’s Q4 2021 report, despite beating estimates and raising fiscal year 2022 EPS above consensus.

BofA Securities remains highly bullish on the stock, posting a ‘Buy’ rating and $372 target. Analyst Ken Hoexter outlined his thesis, noting “We see significant tailwinds, led by pricing gains, margin improvement, continued e-commerce growth, and the return of B2B volumes. Its performance has been driven by robust volume growth, with Express and Ground average daily packages up +12% and +23% year-over-year. The company believes the pull-forward of e-commerce demand is unlikely to reverse post-COVID”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating, based upon 22 ‘Buy’, 3 ‘Overweight’, and 7 ‘Hold’ recommendations. Notably, no analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $270 to a Street-high $397 while the stock enters the new trading week nearly $12 below the low target. This dismal placement should offer a perfect catalyst for buying pressure if Fedex meets or exceed estimates.

Fedex topped out near 275 in January 2018 and entered a decline that bottomed out at an 8-year low in double digits in March 2020. The subsequent uptick completed a round trip into the prior peak in October, yielding a breakout, followed by rangebound action that’s crisscrossed the contested level repeatedly in the last 11 months. Accumulation remains strong while relative strength readings hit oversold levels, marking a potent combination that favors higher prices in the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Stalling Signs? Taking a Look Under the Hood of US Equities

Greetings. I hope this article finds you and yours well. Today, we are taking a look at some additional market indicators and internals to get an unbiased perspective on things.

First, I want to preface things by mentioning that I am not suggesting that I am fully bearish on the S&P 500 or stocks right now. However, I am taking more of a cautious stance at the moment.

 

Figure 1 – S&P 500 Index April 15, 2021 – July 21, 2021, Daily Candles Source stockcharts.com

Nothing new to see here. Just another pedestrian pullback to the 50-day SMA and a bounce back. This pattern has repeated itself several times since the pandemic lows in the $SPX. It won’t repeat itself forever – that would be too easy.

Since it is earnings season, let’s talk earnings multiples.

Feeling bullish? It can be challenging to get excited about an $SPX at 4400 with an estimated 46.40 P/E ratio (trailing twelve months). We are in the middle of earnings season, so we will have a clearer figure soon.

Figure 2 – S&P 500 PE Ratio 1870 – July 22, 2021. Source multpl.com

Stocks are not cheap by any measure, folks. However, with easy monetary policy and low rates, this is to be expected. What could be the catalyst to derail this freight train?

How about the Dow Transports? This index used to be talked about much more frequently and is followed closely by students of Dow Theory. We just don’t hear much analysis about it on Fox Business, CNBC, or Bloomberg these days.

The Dow Transports (Dow Jones Transportation Average) $TRAN is an index comprised of 20 companies.

Here are the index components and weighting as of December 2020:

Alaska Air Group, Inc. 2.55%

American Airlines Group Inc. 0.76%

Avis Budget Group, Inc. 1.80%

C.H. Robinson Worldwide, Inc. 4.61%

CSX Corporation 4.39%

Delta Air Lines, Inc. 1.94%

Expeditors International of Washington, Inc. 4.61%

FedEx Corporation 13.10%

J.B. Hunt Transport Services, Inc. 6.70%

JetBlue Airways Corporation 0.70%

Kansas City Southern 9.73%

Kirby Corporation 2.51%

Landstar System, Inc. 6.60%

Matson, Inc. 2.79%

Norfolk Southern Corporation 11.42%

Ryder System, Inc. 3.12%

Southwest Airlines Co. 2.26%

Union Pacific Corporation 9.91%

United Airlines Holdings, Inc. 2.11%

United Parcel Service, Inc. 8.39%

Figure 3- Dow Jones Transportation Index January 4, 2021 – July 21, 2021, Daily Candles Source stockcharts.com

Here, and in contrast to the Dow Jones Industrial Average, we can see that the Transports topped back on May 10, 2021. Proponents of Dow Theory would argue that this creates a lack of confirmation and that the subsequent highs in the Dow Jones Industrial Average are not valid due to this lack of confirmation.

What could be the reason for the stall in the Transports? Input Costs? While fuel costs have risen, what about the rise in retail spending? Is the stimulus-powered consumer pocket not enough to counterbalance the rising input costs?

If input costs are the reason for the stalling, what about the other companies that rely on raw materials to make their products? Recent inflationary data has not affected these companies’ stock prices yet (for the most part).

What if the Fed eases off the gas pedal?

While it is very difficult (if not impossible) to pick market tops (and I don’t advocate trying to do that), it is wise to look at certain market indicators to get an understanding of what is going on beneath the surface.

It is easy to look at the chart of the $SPX and see that it is moving higher, from the bottom left-hand corner of the chart to the top right-hand corner. However, that does not tell the whole story of what is happening in the US equity markets.

We will be monitoring the above and previously mentioned market internals and indicators for more clues in the coming days, weeks, and months. I think it is critical to be aware of metrics such as the above as the broader indices trade near all-time highs.

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For a look at all of today’s economic events, check out our economic calendar.

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

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Today’s Market Wrap Up and a Glimpse Into Friday

An infrastructure deal was reached in Washington, D.C. and stocks were up on Wall Street. The S&P 500 set a new record high after rising fractionally to 4266.49. The broader market index last reached a new high in mid-June. The recent Fed-induced losses did not last long as investors decided to look at the market glass as half-full.

The Dow Jones Industrial Average isn’t too far from its new all-time high after tacking on about 1% in Thursday’s session. The Nasdaq was fractionally higher. Some of the standouts in today’s session include:

  • Tesla gained 3.5%, extending yesterday’s rally.
  • Caterpillar rose 2.6%, reclaiming some ground it lost on inflation and rate-hike fears last week.
  • FedEx stock is down in extended hours despite experiencing record Q4 earnings and revenue that increased 27%. The company swung to a profit after a quarterly loss in the year-ago period, reporting net income of USD 1.87 billion, or USD 6.88 per diluted share. The transportation company’s services have been in high demand throughout the pandemic, including the delivery of vaccines. The stock is seeing heavy options activity including bullish expectations for shares to gain as much as 18% by the July expiration of contracts.

Stocks to Watch

Nike stock is up 11% in after-hours trading after beating on the top and bottom lines with Q4 results. The company’s results were driven by a recovery in the North American region, where sales grew more than twofold YoY to a new peak of USD 5.38 billion. Nike also experienced robust results in China and its digital sales segment. The trend of comfortable clothing is persisting even after the lockdowns have lifted.

In addition, The Trade Desk, an ad stock, gained 17% today and is trading higher in the after-hours. The stock is benefiting from Google’s decision to delay its move to do away with cookies until 2023. Google is making the change in response to privacy concerns and was initially expected to remove the tracking tech next year.

Look Ahead

On the economic front, personal income and spending for May will be released on Friday. Now that the government stimulus checks are a thing of the past, the expectations are for a further decline in personal income. It will likely not be of the same magnitude as the 13.1% MoM drop in April over March levels, but economists, nonetheless, are expecting a decline. Personal spending is expected to rise slightly.

Amazon.com Nears Major Breakout

Amazon.com Inc. (AMZN) has been treading water since topping out above 3,500 in September 2020 but is nearing completion of a major breakout pattern, just in time for this year’s Prime Day. While the two events aren’t really connected, the convergence signals better times for shareholders of the e-commerce juggernaut because the pattern projects a strong uptrend that could eventually top 5,000.

New Revenue Sources

The stock posted a phenomenal 76% return in 2020, underpinned by pandemic lockdowns that forced smaller competitors to close their doors or rush to upgrade online sales portals. The rally ran out of steam in September, giving way to a broad rectangular pattern that’s now carved the outline of an inverse head and shoulder breakout pattern. Taken together with price action since 2018, the current uptick could signal the start of the final leg of an Elliot 5-wave advance.

Amazon initiatives unrelated to online sales could generate substantial income in coming years. For starters, it just signed contracts with multiple companies to provide telehealth services through Amazon Care, which will dovetail nicely with the new Amazon Pharmacy online prescription fulfillment service. It’s also working with the U.S. Postal Service to deliver cargo and could soon compete directly with FedEx Corp. (FDX) and United Parcel Service Inc. (UPS).

Wall Street and Technical Outlook

Wall Street consensus hasn’t budged in the last three months, with a ‘Buy’ rating based upon 42 ‘Buy’, 6 ‘Overweight’, and 1 ‘Hold” recommendation. No analysts are recommending that shareholders close positions, despite last year’s outsized share gains. Price targets currently range from a low of $3,775 to a Street-high $5,500 while the stock is set to open Monday’s session more than $275 below the low target. This is a perfect placement for a rapid escalation to the upside.

Amazon broke out above the 2018 high near 2,000 in April 2020 and took off in a strong uptrend that posted an all-time high at 3,552.25 in September. The stock then entered a lateral consolidation, holding two tests at support near 2,850. It returned to resistance in April and pulled back, carving the last leg of an inverse head and shoulders pattern, and is now trading just 60 points below resistance. Taken together with emerging buy cycles, this price action greatly raises odds for a breakout.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

FedEx Struggling to Hold Long-Term Uptrend

FedEx Corp. (FDX) reports fiscal Q4 2021 results after Thursday’s closing bell, with analysts looking for a profit of $4.96 per-share on $21.49 billion in revenue. If met, earnings-per-share (EPS) will mark a 96% profit increase compared to the same quarter in 2020 when the world shut down due to the pandemic. The stock took off in a strong advance in March after beating Q3 top and bottom line estimates by wide margins, posting an all-time high near 320 in May.

Amazon Looms Large

The shipping giant has lost ground since that time, caught in the rotation out of economic recovery plays triggered by the slow rollout of vaccines in Europe and parts of Asia. It also topped out just six days after announcing a rate increase, which traditionally triggers higher stock prices in expectations of bigger profits. Rival UPS Inc. (UPS) has impacted buying interest as well, posting modest long-term financial targets that triggered an aggressive sell-the-news reaction.

However, the return of Amazon.com Inc. (AMZN) as a major competitor could mark the biggest hurdle for FedEx in coming quarters. The e-commerce juggernaut abandoned plans to bring deliveries in-house in April 2020 to focus on rapidly increasing market share. However, the company has started to ship cargo for the U.S. Postal Service, raising fears it will move aggressively to take loyal customers from other traditional shippers.

Wall Street and Technical Outlook

Wall Street consensus has improved in the last three months, now standing at an ‘Overweight’ rating based upon 20 ‘Buy’, 3 ‘Overweight’, 6 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $265 to a Street-high $383 while the stock closed Friday’s session just $20 above the low target. This depressed placement suggests that Main Street is more skeptical about FedEx’s long-term outlook than professional analysts.

FedEx ended a strong uptrend at 275 in January 2018 and entered a steep decline that posted a 7-year low in March 2020. The subsequent uptick unfolded in a vertical trajectory, reaching the prior high in October. A breakout into December failed but the stock mounted that peak in May 2021, added a few points, and failed the rally once again at month’s end. It’s now trading just 10 points above the 2018 high, caught in a distribution wave that highlights shareholder frustration.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Earnings to Watch Next Week: Darden Restaurants, Nike, FedEx and CarMax in Focus

Earnings Calendar For The Week Of June 21

Monday (June 21)

There are no major earnings scheduled.

Tuesday (June 22)

Ticker Company EPS Forecast
SMDS Ds Smith £12.65
KFY Korn Ferry International $0.98
AVAV AeroVironment $0.81
KWHIY Kawasaki Heavy Industries ADR -$0.16

Wednesday (June 23)

Ticker Company EPS Forecast
PDCO Patterson Companies $0.51
INFO IHS Markit Ltd $0.80
WGO Winnebago Industries $1.76
KBH Kb Home $1.33
FUL HB Fuller $0.92
OMVJF OMV $0.97

Thursday (June 24)

IN THE SPOTLIGHT: DARDEN RESTAURANTS, NIKE, FEDEX

DARDEN RESTAURANTS: The Orlando-based restaurant operator is expected to report its fiscal fourth-quarter earnings of $1.76 per share, which represents year-over-year growth of about 242%, up from a loss of -$1.24 per share seen in the same period a year ago.

The multi-brand restaurant operator would post year-over-year revenue growth of nearly 70% to $2.16 billion. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 270%.

“Best in class casual dining operator with strong brand portfolio. As the largest CDR operator, DRI has substantial scale advantages in shared services which can be levered in a post-COVID-19 environment by improving margins and gaining market share. Lead brand Olive Garden (~50% of sales) garners top consumer scores, its comp sales have historically outpaced the industry and recent cost savings have improved unit economics,” noted John Glass, equity analyst at Morgan Stanley.

“Acquisition of Cheddar’s has been more challenging than initially expected, though still provides longer-term growth potential. Strong position relative to peers, scale, operational leadership, unit growth and structurally higher margins drive our OW rating.”

NIKE: The world’s largest athletic footwear and apparel seller is expected to report its fiscal fourth-quarter earnings of $0.51 per share, which represents year-over-year growth of 200%, up from a loss of -$0.51 per share seen in the same period a year ago.

The Beaverton, Oregon-based footwear retailer would post year-over-year revenue growth of over 75% to $11.8 billion.

“There are many moving pieces in the Nike (NKE) model including an easy comparison from Q4:20 and shipment shifts into Q4:21 but our proprietary data on China through May 2021 is pointing to a continued deceleration in Tmall GMV, negative social media sentiment in China, and poor Baidu search trends. FY22 consensus EPS estimates appear too high. We are lowering our price target to $145,” noted John Kernan, equity analyst at Cowen.

FEDEX: The Memphis, Tennessee-based multinational delivery services company FedEx is expected to report its fiscal fourth-quarter earnings of $4.97 per share, which represents year-over-year growth of over 96% from $2.53 per share seen in the same period a year ago.

The delivery firm would post revenue growth of over 20% to $21.47 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 41%.

“We expect a beat for F4Q21 as many of the LTM trends we have seen will continue. However, more than ever, 4Q results are likely not as important as the FY22 guide, which will be the critical test of how much of the pandemic tailwinds mgmt. believes are sustainable (and deserves to be priced in),” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JUNE 24

Ticker Company EPS Forecast
ACN Accenture $2.24
DRI Darden Restaurants $1.76
WOR Worthington Industries $1.68
NKE Nike $0.51
FDX FedEx $4.97
SNX SYNNEX $1.93
BBBY Bed Bath & Beyond Inc. $0.08

Friday (June 25)

IN THE SPOTLIGHT: CARMAX

The United States’ largest used-car retailer is expected to report its fiscal first-quarter earnings of $1.63 per share, which represents year-over-year growth of over 600% from $0.23 per share seen in the same period a year ago.

The Goochland County-based used car giant would post year-over-year revenue growth of about 92% to $6.19 billion.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumer,” noted Adam Jonas, equity analyst at Morgan Stanley.

CarMax (KMX) has consistently generated profitability and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omnichannel rollout.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE JUNE 25

Ticker Company EPS Forecast
PAYX Paychex $0.67
KMX CarMax $1.63

 

FedEx Completes Wave 4 Pullback at 38.2% Fibonacci

The FedEx Corporation (FDX) has made a bullish bounce as expected in our previous analysis. But the rebound was even stronger than expected because price action broke above the top.

How far can the uptrend go? Let’s review the key Elliott Wave and Fibonacci patterns.

Price Charts and Technical Analysis

Fedex 16.06.2021 daily chart

The FDX daily chart is showing a strong uptrend with all the moving averages bullishly aligned:

  1. The previous price swing is a wave 3 (purple) of wave 3 (red) due to its steep angle.
  2. The pullback was indeed a wave 4 (purple) which bounced at the 144 ema.
  3. The current higher high is expected to be part of a wave 5 (purple) of wave 3 (red).
  4. Within the wave 5 (purple), price action is building a 5 wave (pink) pattern. The current push up seems to be a wave 3 (pink).
  5. The current pullback could be a wave 4 (pink) as long as price action stays above the 50% Fibonacci level.
  6. A break below the 50% Fib places it on hold (orange circle) and a deeper break invalidates it (red circle).
  7. The main targets are located at the -27.2% Fibonacci level at $340 and the -61.8% Fibonacci level at $365.

On the 4 hour chart, price action could be testing the support trend line (green):

  1. A bullish bounce took place at the 38.2% Fibonacci level, which makes a wave 4 (green) likely.
  2. A bullish breakout above the 21 ema high could confirm the uptrend continuation (green arrows).
  3. Price action should stay above the 50% Fibonacci level if this is indeed a wave 4 (green).
  4. A bullish bounce (blue arrow) could take place at the 50% Fib as well if price action gets there.

Fedex 16.06.2021 4 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

For a look at all of today’s economic events, check out our economic calendar.

FedEx Could Hit New All-Time High on Strong Q4 Earnings

The Memphis, Tennessee-based multinational delivery services company FedEx is expected to report its fiscal fourth-quarter earnings of $4.91 per share, which represents year-over-year growth of about 95% from $2.53 per share seen in the same period a year ago.

The delivery firm would post revenue growth of over 20% to $21.47 billion. In the last four quarters, on average, FedEx has beaten earnings estimates over 41%.

The company’s next earnings report is expected to be released on June 24, 2021. FedEx shares rose over 18% so far this year. The stock fell about 1.4% on Wednesday.

Analyst Comments

“We expect a beat for F4Q21 as many of the LTM trends we have seen will continue. However, more than ever, 4Q results are likely not as important as the FY22 guide, which will be the critical test of how much of the pandemic tailwinds mgmt. believes are sustainable (and deserves to be priced in),” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS.”

FedEx Stock Price Forecast

Eighteen analysts who offered stock ratings for FedEx in the last three months forecast the average price in 12 months of $336.80 with a high forecast of $383.00 and a low forecast of $250.00.

The average price target represents a 9.86% increase from the last price of $306.57. Of those 18 analysts, 15 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley raised the stock price forecast to $265 from $250 with a high of $400 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Equal-weigh” rating on the health care company’s stock.

Several other analysts have also updated their stock outlook. FedEx has been assigned a $350 price objective by analysts at Berenberg Bank. The firm presently has a “buy” rating on the shipping service provider’s stock. Robert W. Baird reaffirmed a “buy” rating on shares.

Credit Suisse Group slashed their price target to $350 from $368 and set an “outperform” rating. KeyCorp raised their price target to $370 from $350 and gave the stock an “overweight” rating. JPMorgan raised the target price to $366 from $340.

Check out FX Empire’s earnings calendar

FedEx to Reduce Debt by $2.6 Billion After Bond Offering

The offerings represent the largest series of related debt transactions in its history, the company said in a statement.

Using proceeds from the debt offerings and existing cash, FedEx will eliminate all debt maturities through fiscal year 2025.

The offerings, which will be completed later this month, also include a 600 million euro sustainability bond tranche in Europe to fund its goal of carbon-neutral operations by 2040.

(Reporting by Shreyasee Raj; Editing by Ramakrishnan M.)

FedEx Builds Bullish Channel After Bouncing at 38.2% Fibonacci

The FedEx corporation (FDX) made a strong bullish bounce at the 144 ema. Price has also broken above the 21 ema zone. Plus an uptrend channel is now established.

What are the main targets for this chart? And what kind of price patterns do we expect?

Price Charts and Technical Analysis

Fedex 31.03.2021 daily chart

The FDX daily chart had a strong impulse up. This has been labeled as wave 3 (pink). Let’s review what’s going right now:

  1. The current pullback completed at the 144 ema zone and 38.2% Fibonacci retracement level (green box).
  2. This retrace could either complete the wave 4 (pink) or be part of a larger ABC (grey) correction in wave 4’ (pink).
  3. In both cases price action is expected to reach the previous top at $305 (red line).
  4. A bearish bounce (orange arrow) could indicate a retest of the previous bottom within a larger wave 4’ (pink).
  5. A bull flag chart pattern (grey arrows), however, could indicate that the bulls remain in control and indicate a bullish breakout.
  6. The main target area is the previous top at $305. A break above the top should aim at the -27.2% Fib target at $350 followed by the -61.8% Fib target at $400. Although the first Fib target zone at $350 could start another wave 4 pattern.

On the 4 hour chart, price action seems to have completed 5 waves up (blue) and then followed by an ABC correction (blue). This could be part of a wave 1-2 or a-b.

  1. The continuous higher highs and higher lows confirms an uptrend channel.
  2. Any pullback towards the previous candle highs and 21 ema zone should create support (green arrows) at around $280.
  3. A deeper pullback places the uptrend scenario on hold (yellow/red circles).
  4. Price is not expected to decline below $264 or otherwise the uptrend is in trouble.

Fedex 31.03.2021 4 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

For a look at all of today’s economic events, check out our economic calendar.

FedEx Shares Gain Over 4% On Solid Earnings, Upbeat Guidance

FedEx Corp’s shares rose over 4% in extended trading on Thursday after the delivery firm reported better-than-expected earnings in the fiscal third quarter, largely driven by strong volume growth in U.S. domestic residential package due to the ongoing COVID-19 pandemic.

The Memphis, Tennessee-based multinational delivery services company said adjusted net income surged more than 150% year-on-year to $939 million, or $3.47 per share, in the fiscal third quarter ended February 28. That was above Wall Street’s consensus estimates of $3.30 per share. FedEx said its revenue rose 23% to $21.5 billion during the period.

FedEx expects adjusted earnings of $17.60 to $18.20 per share for fiscal 2021, above the market expectations of $17.40. The company also added that continued strong earnings growth expected in the fiscal fourth quarter.

Following this upbeat result, FedEx shares, which surged more than 70% in 2020, rose over 4% in extended trading on Thursday.

Analyst Comments

FedEx reported the strongest February quarter in its history as a strong peak shipping season and higher prices led to a 23% increase in revenue. The company continues to see strong momentum as B2B is improving and e-commerce is growing. We believe these shares can trade higher as pricing is likely to remain strong through at least this calendar year,” noted Helane Becker, Managing Director at Cowen and Company.

“We are reiterating our Outperform rating on the common shares of FedEx Corp. We are maintaining our $335 price target, which is based on 17.4x our FY22 EPS estimate. Shares of FedEx traded higher in the after-hours session as volume and yield trends drove revenue and EPS above expectations, even on lower margins; Express margins came in below our estimate while Ground margins were ahead. Earnings were helped by a lower than the expected tax rate, 15% vs our estimate of ~21%. This added $0.23 / share to EPS. We expect the shares should react favorably following the company’s full fiscal year guidance, which is above the consensus estimate (excluding year-end adjustments).”

FedEx Stock Price Forecast

Ten analysts who offered stock ratings for FedEx in the last three months forecast the average price in 12 months of $332.25 with a high forecast of $356.00 and a low forecast of $305.00.

The average price target represents a 26.09% increase from the last price of $263.51. Of those ten analysts, eight rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $250 with a high of $400 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Overweight” rating on the delivery services company’s stock.

Several other analysts have also updated their stock outlook. FedEx had its price target raised by Credit Suisse Group to $351 from $350. The firm currently has an outperform rating on the shipping service provider’s stock. UBS Group increased their price target to $380 from $320 and gave the stock a buy rating.

Moreover, the Goldman Sachs Group set a $356.00 price objective and gave the company a buy rating. Zacks Investment Research upgraded FedEx from a hold rating to a strong-buy rating and set a $286.00 price objective.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14-15x PE) on current EPS,” said Ravi Shanker, equity analyst at Morgan Stanley.

Check out FX Empire’s earnings calendar

FedEx to Beat Q3 Earnings Estimates; Buy With Target Price $323

U.S. delivery firm FedEx Corp is expected to report a profit of $3.35 in the fiscal third quarter, which represents year-over-year growth of over 137% from $1.41 per share seen in the same quarter a year ago.

In the last four consecutive quarters, on average, the Memphis, Tennessee-based multinational delivery services company has delivered an earnings surprise of over 36%. FedEx is also expected to post year-over-year revenue growth of over 13% to around $20 billion during the quarter.

FedEx shares, which surged over 70% in 2020, has but it has lost some steam and rose just about 1% so far this year. At the time of writing, the shares were 0.9% higher at $263.1 on Wednesday.

Analyst Comments

“We expect a modest beat for F3Q21 as peak-season momentum exiting 2020 should help offset a few cost headwinds. However, both numbers and expectations face tough comps and receding momentum in FY22, which will be challenging to overcome,” Ravi Shanker, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14x PE) on current EPS.”

FedEx Stock Price Forecast

Eighteen analysts who offered stock ratings for FedEx in the last three months forecast the average price in 12 months of $323.40 with a high forecast of $356.00 and a low forecast of $250.00.

The average price target represents a 23.30% increase from the last price of $262.28. Of those 18 analysts, 13 rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $250 with a high of $400 under a bull scenario and $100 under the worst-case scenario. The firm gave an “Equal-weight” rating on the delivery services company’s stock.

Several other analysts have also updated their stock outlook. FedEx had its price target trimmed by Credit Suisse Group to $350 from $368. The firm currently has an outperform rating on the shipping service provider’s stock. UBS Group increased their price target to $380 from $320 and gave the stock a buy rating.

Moreover, the Goldman Sachs Group set a $356.00 price objective and gave the company a buy rating. Zacks Investment Research upgraded FedEx from a hold rating to a strong-buy rating and set a $286.00 price objective.

“We are reiterating our Outperform rating on the common shares of FedEx Corp. We maintain our price target of $335, which is based on 17.6x our FY22 EPS estimate. FedEx reports 3QFY21 results AMC on Thursday, March 18 with a call scheduled for 5:30 PM ET (webcast). Our focus for the call is: 1) Pricing durability, 2) Recovery of B2B volumes, 3) Density improvements and margin outlook, 4) Impact of vaccine distribution on the supply/demand dynamic,” noted Helane Becker, Managing Director at Cowen and Company.

We think it is good to buy at the current level and target $323 in the long-term as 150-day Moving Average and 100-200-day MACD Oscillator signals a buying opportunity.

Check out FX Empire’s earnings calendar

FedEx Could Break Out in Coming Months

FedEx Corp. (FDX) reports fiscal Q3 2021 earnings after Thursday’s closing bell, with analysts expecting a profit of $3.23 per-share on $19.9 billion in revenue. If met, earnings-per-share (EPS) will mark a healthy 229% profit increase compared to the same quarter in 2020, which ended just before the March lockdown. The stock fell more than 17% in the weeks following December’s Q1 report, despite beating top and bottom line estimates by wide margins.

Pandemic Beneficiary

The shipping giant ended 2020 with a remarkable 71% return, highlighting the surge in business activity as a result of the pandemic and e-commerce’s rapid share gains. Even so, the rally failed to clear resistance at the 2018 high at 274.66, reversing just above that barrier ahead of the December report. However, the turnaround was perfectly normal because the stock gained ground in a straight line after the lockdown and was exceptionally overbought heading into 2021.

A steep downtrend that started during the 2018 trade war accelerated in 2019 after Amazon.com Inc. (AMZN) pulled its shipping business as part of an initiative to build an in-house delivery system. The e-commerce juggernaut reversed gears in April 2020, choosing to focus on rapidly-growing market share as a result of the pandemic. The stock soared, making up for lost time with a relentless uptrend that finally ran out of gas in December.

Wall Street and Technical Outlook

Wall Street believes FedEx is undervalued, with a ‘Buy’ rating based upon 17 ‘Buy’, 4 ‘Overweight’, 6 ‘Hold’, and 1 ‘Underweight’ recommendation. No analysts are recommending that shareholders close positions. Price targets range from a low of $250 to a Street-high $386 while the stock closed Friday just $20 above the low target. While these numbers confirm the broad-based rotation out of COVID beneficiaries, a breakout appears likely in coming months.

FedEx posted a 7-year low in March 2020 and turned sharply higher, more than tripling in price into year’s end. The subsequent decline found support at the 50-day moving average in January, yielding an extended test at that level, followed by a modest uptick that posted a 2021 high on Friday. Bull cycles are slowly coming around after the correction, potentially completing the handle of a three-year cup and handle breakout pattern.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Earnings to Watch Next Week: Lennar, Five Below, Dollar General, FedEx and Nike in Focus

Earnings Calendar For The Week Of March 15

Monday (March 15)

Ticker Company EPS Forecast
YALA Yalla $0.12
FCEL Fuelcell Energy -$0.04
YY YY $7.54
HQY Healthequity Inc $0.40
CBPO China Biologic $0.69
NGHC National General $0.73
MNTA Momenta Pharmaceuticals -$0.50
KHOLY Koc Holdings AS $0.55
PKX Posco $1.52
PE Parsley Energy $0.25
WPX WPX Energy $0.04
BEAT BioTelemetry $0.48
JOBS 51job $6.40
BKRKY Bank Rakyat $0.13

Tuesday (March 16)

IN THE SPOTLIGHT: LENNAR

Lennar Corp, a home construction and real estate company, is expected to report a profit of $1.71 per share in the first quarter, which represents year-over-year growth of about 35% from $1.27 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 35%.

Miami, Florida-based company would post year-over-year revenue growth of about 14% to around $5.1 billion.

“Shares of Lennar have outperformed the industry in the past six months. The company is benefiting from effective cost control and focus on making its homebuilding platform more efficient, which in turn resulted in higher operating leverage. Higher demand for new homes backed by declining mortgage rates and low inventory levels bodes well. Focus on the lighter land strategy to boost free cash flow will bolster the balance sheet and thereby drive returns,” said equity analysts at ZACKS Research.

“Moreover, solid first quarter 2021 guidance indicates margin expansion and deliveries to increase significantly. Also, earnings estimates for 2021 have increased over the past 30 days. However, higher land, labour and material costs are concerning. This may exert pressure on the company’s upcoming quarters as well.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 16

Ticker Company EPS Forecast
UTG Unite Group £45.10
GRG Greggs -£10.80
FERGY Ferguson ADR $0.22
JBL Jabil Circuit $0.94
CRWD CrowdStrike Holdings Inc. Cl A $0.09
SMAR Smartsheet Inc. -$0.13
LEN Lennar $1.71
WF Woori Bank $0.75
HTHT China Lodging $2.51
ANTO Antofagasta £0.42
HDS HD Supply Holdings $0.39
WG John Wood Group £0.14

 

Wednesday (March 17)

IN THE SPOTLIGHT: FIVE BELOW

Five Below, a discount retailer that sells products that cost up to $5, is expected to report a profit of $2.11 per share in the fourth quarter, which represents year-over-year growth of over 7% from $1.96 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 44%.

The Philadelphia, Pennsylvania-based company would post year-over-year revenue growth of about 25% to around $857.1 million.

FIVE reported strong Holiday sales results in Jan, and 4Q guidance was better than expected. With 4Q largely preannounced, we believe investor focus will turn to the expansion of partnerships (with Bugha here and Andrea Pippins here), Five Beyond progress, and potential guidance. For 4Q, we are estimating EPS to be $2.12, at the high end of mgmt’s guidance of $2.08-2.12 and ahead of cons. of $2.11,” noted Randal J. Konik, equity analyst at Jefferies.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 17

Ticker Company EPS Forecast
KC Kutcho Copper -$0.84
CTAS Cintas $2.19
WSM Williams Sonoma $3.36
FIVE Five Below $2.11
PD PagerDuty Inc. -$0.11
SMTC Semtech $0.48
TCEHY Tencent $0.50
ILD Iliad €0.75
EGFEY Eurobank Ergasias S.A. ADR $0.01
MLHR Herman Miller $0.58

 

Thursday (March 18)

IN THE SPOTLIGHT: DOLLAR GENERAL, FEDEX, NIKE

DOLLAR GENERAL: The U.S. largest discount retailer by number of stores is expected to report a profit of $2.72 in the fourth quarter, which represents year-over-year growth of over 29% from $2.10 per share seen in the same quarter a year ago.

The company, which offers merchandise including consumables, seasonal, home products and apparel at everyday low prices, would post year-over-year revenue growth of over 15% to around $8 billion.

“We believe cons. ests. for 4Q and next year are likely conservative. We est.4Q EPS of $2.75 vs. cons. of $2.72 and EPS in ’21 of $10.68 vs cons. of $10.04. When DLTR reported 4Q, FD comps were better than expected (+8.1%, ahead of cons. of+6.7%, and above 3Q levels). Note, however, that DG’s comp has outperformed that of FD by ~400bps over the last 11 quarters, on average, and DG’s comp has outperformed that of FD by >600bps through the first three quarters of 2020, on average. Thus, we believe DG’s 4Q comp could be ~12% (or perhaps even higher), given the company exited 3Q with a comp of +14%, discussed,” Jefferies’ Konik added.

FEDEX: Memphis, Tennessee-based multinational delivery services company is expected to report a profit of $3.35 in the fiscal third quarter, which represents year-over-year growth of over 137% from $1.41 per share seen in the same quarter a year ago. In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 36%.

The package delivery company would post year-over-year revenue growth of over 13% to around $20 billion.

“We expect a modest beat for F3Q21 as peak-season momentum exiting 2020 should help offset a few cost headwinds. However, both numbers and expectations face tough comps and receding momentum in FY22, which will be challenging to overcome. Remain Equal-weight,” Ravi Shanker, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain skeptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14x PE) on current EPS.”

NIKE: The world’s largest athletic footwear and apparel seller is expected to report a profit of $0.76 in the fiscal third quarter, which represents a year-over-year decline of over 2% from $0.78 per share seen in the same quarter a year ago.

The Beaverton, Oregon-based company would post year-over-year revenue growth of over 8% to around $11 billion.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MARCH 18

Ticker Company EPS Forecast
UTZ Utz Brands $0.10
DG Dollar General $2.72
CMC Commercial Metals $0.51
WB Weibo $0.71
ACN Accenture $1.89
SIG Signet Jewelers $3.59
WOOF VCA $0.12
OLLI Ollies Bargain Outlet Holdings Inc $0.85
FDX FedEx $3.35
NKE Nike $0.76
TOELY Tokyo Electron Ltd PK $0.80
GOL Gol Linhas Aereas Inteligentes -$0.36
AUOTY AU Optronics $0.31

 

Friday (March 19)

Ticker Company EPS Forecast
ERJ Embraer -$0.31
CHL China Mobile $2.01

 

FedEx CEO to Testify as U.S. Lawmakers Make Green Infrastructure Push

By David Shepardson

The previously unreported testimony will come at a hearing before the House Transportation and Infrastructure Committee titled “The Business Case for Climate Solutions” and is also expected to include testimony from electric utility PG&E Corp.

Representative Peter DeFazio, a Democrat who chairs the panel, said in an interview that a massive infrastructure bill will create millions of new jobs and reduce carbon emissions.

“We’re trying to make the business case — everybody else is going to go electric — you don’t have to believe in climate change,” DeFazio said.

Last week, FedEx said it planned to become carbon-neutral by 2040 and will invest $2 billion in vehicle electrification, sustainable energy, and carbon sequestration. FedEx also said its entire parcel pickup and delivery fleet will be zero–emission electric vehicles by 2040.

Amazon.com in 2019 pledged to make the largest U.S. e-commerce company net carbon-neutral by 2040 and to buy tens of thousands of electric delivery vans. A number of automakers and start-up companies are working to develop electric-vehicle pickups and larger delivery vehicles.

Lawmakers will look at private-sector actions addressing climate change, with a focus on surface transportation, aides said.

A FedEx spokeswoman declined to comment on Smith’s testimony.

DeFazio met with Democratic President Joe Biden and House lawmakers last week. Biden made the business case for electric vehicles, or EVs, at the meeting, DeFazio said, and raised General Motors Co’s goal of ending production of gasoline-powered passenger vehicles by 2035.

“(Biden) talked about the Chinese eating our lunch, the Chinese want to dominate the electric auto market,” DeFazio said. Biden told lawmakers “We can’t let that happen,” DeFazio added.

Democrats want to boost electric buses, see thousands of new charging stations installed and facilitate the large electric trucks coming to market. DeFazio backed legislation this week to give the U.S. Postal Service $6 billion to make its next generation of delivery vehicles nearly all EVs.

DeFazio says adopting a vehicle miles-traveled fee to pay for infrastructure before a Sept. 30 highway funding deadline is not realistic. He said a gasoline tax hike could still be part of paying for infrastructure improvements.

He said his “tentative timeline” is to have an infrastructure bill approved by his committee in May. “It is going to be green and it is going to be big,” he said.

(Reporting by David Shepardson; editing by Jonathan Oatis)

FedEx Aims for +20% Target Despite Strong Decline

The FedEx Corporation (FDX) has recently retraced to and bounced at the 38.2% Fibonacci retracement level.

This analysis reviews the potential wave and chart patterns connected to a 38.2% Fib bounce. We also pinpoint the best target for the upcoming few trading weeks.

Price Charts and Technical Analysis

Fedex 14.01.2021 daily chart

The FDX daily chart has retraced down to the 38.2% Fibonacci and 144 ema zone. But the overall trend is strongly up. We can see this simply by adding long-term moving averages (blue box).

The quick pace of the decline, however, does indicate that the retracement is likely to be lengthy or deeper than usual for a wave 4 (grey). Here is what to expect, starting with the most likely:

  • An ABCDE triangle chart pattern (as shown in the image)
  • An ABC bull flag pattern
  • An ABC zigzag pattern

Although price action made a strong decline, a bullish bounce back towards the deep Fibonacci levels and previous top is likely to occur within a wave B (orange). The main target zone is therefore around $292-$305 for the short-term.

At the moment, a bearish bounce is expected at the target zone to create a wave C (orange). Eventually a new high is expected at around $350 once the triangle is completed (blue arrow).

On the 1 hour chart, we already see blue Elliott Wave candles emerge. This is indicating the potential start of the bullish run in wave B (orange).

The first target is the 38.2% Fib zone and long-term moving averages. Here we expect a bounce down and a higher low before a new bullish swing up again.

Fedex 14.01.2021 hourly chart

Good trading,

Chris Svorcik

For a look at all of today’s economic events, check out our economic calendar.

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

 

Top Transportation Stocks For 2021

Transportation stocks should gain substantial ground in 2021 as a trio of vaccines makes its way around the planet, eventually bringing the COVID-19 pandemic to a screeching halt. Increased mobility and economic activity as the crisis dissipates should translate into higher shipping volume, more airline passengers, rising car rentals, and bigger loads of containers crossing the Atlantic and Pacific, improving the financial fortunes of the planes, trains, and automobiles that move our world.

The Dow Jones Transportation Average has posted a modestly positive 13% return so far in 2020, despite a 30% decline in the airline sub-sector, which accounts for six of the 15 index components.  However, the instrument is now trading more than 75% above March’s four-year low, highlighting an historic recovery wave that’s set the stage for much stronger annual returns when the calendar flips into January.

Let’s look at three top transportation stocks for 2021.

Fedex

Fedex Corp. (FDX) entered 2020 in the third year of a bear market that accelerated after Amazon.com Inc. (AMZN) announced the build-out of an enormous in-house delivery system. The e-commerce giant abandoned those plans in April, ending the decline with a momentum-fueled advance that’s more than tripled the price posted at the March low. However, the stock has now reached 2018 resistance, triggering a pullback that’s delayed a breakout until 2021.

Kansas City Southern

Kansas City Southern (KSU) operates on North America’s most heavily travelled north-south railroad line, moving many of the goods traded between Canada, United States, and Mexico. Surging infections in all three countries have dampened shipping volumes despite the USMCA treaty, better known as the ‘new NAFTA’. All of North America is set for stronger economy activity as the virus recedes, hopefully adding to the stock’s impressive 30% 2020 return.

Landstar Systems

Landstar Systems Inc. (LSTR) is the U.S.’s largest owner-operator trucking company, allowing drivers to run their own contracting businesses.  The stock mounted 2018 resistance in July and kept on going, adding another 20 points before topping out in September. Price action has carved a rounded correction since that time, holding intermediate support at the 50-day moving average. The bullish pattern now looks complete, setting the stage for another breakout in early 2021.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

FedEx Earnings Beat Wall Street Estimates But Weak Ground Margins Hurt Shares

FedEx, the world’s leading express delivery company, reported better-than-expected earnings in the second quarter of the fiscal year 2021, but the Memphis-based delivery services company’s ground margins were less impressive than the previous quarter, sending its shares down about 4% in extended trading on Thursday.

The U.S. delivery firm said its fiscal second quarter ended November 30 adjusted net income rose to $1.30 billion, or $4.83 per share, from $660 million, or $2.51 per share from the same period a year ago. That was better than the Wall Street consensus estimate of $$3.93 per shares. The company’s revenue jumped 19% to $20.6 billion, again beating analysts’ expectations of $19.5 billion.

However, ground results were much lower-than-anticipated. Although margin improved 110 basis points y/y to 7.5%, it was the third-lowest ever, following the troughs of fiscal second quarter and third quarter of 2020.

Following this, FedEx’s shares declined about 4% to $281.75 in extended trading on Thursday after closing 1.19% higher at $292.26. The U.S. delivery firm’s stock has almost doubled – rising around 95% – so far this year.

“Ground’s margin fell short of our expectations and probably consensus. We think that’s partly because of unusually high “peak prep” costs (including pulling forward payments to ISP-drivers and significant sorting-headcount additions), along with pandemic related inefficiencies. We think the shares could see some selling pressure at market open on December 18 due to Ground’s margin performance,  which wasn’t bad but likely didn’t demonstrate the incremental operating leverage from volume growth that investors were looking for following the impressive fiscal first-quarter showing,” noted Matthew Young, equity analyst at Morningstar.

“We don’t expect to materially alter our $210 fair value, save for a potential slight increase from the time value of money and raising our top-line forecast, partly offset by lowering our near-term Ground EBIT-margin estimates. Following a surge in recent months, the shares are moderately overvalued. FedEx should continue to generate greater returns on its substantial network investment, but we think investor expectations have effectively set the bar a bit high in terms of long-term free cash flow growth,” Young added.

FedEx Stock Price Forecast

Eleven equity analysts forecast the average price in 12 months at $338.73 with a high forecast of $380.00 and a low forecast of $281.00. The average price target represents a 15.90% increase from the last price of $292.26. All those 11 analysts rated “Buy”, according to Tipranks.

Morgan Stanley gave the base target price of $250 with a high of $400 under a bull-case scenario and $100 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the express delivery company’s stock.

Several other analysts have also upgraded their stock outlook. FedEx had its price objective raised by Cowen to $335 from $328. They currently have an outperform rating on the shipping service provider’s stock. Wells Fargo & Company lifted their price target to $331 from $286 and gave the stock an overweight rating. Raymond James lifted their price target to $280 from $165 and gave the stock an outperform rating. At last, Sanford C. Bernstein reaffirmed a buy rating and issued a $308 price target.

We think it is good to buy at the current level and target $330 as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst Comments

“FedEx’s modest F2Q beat likely falls short of a high bar that current valuation/expectations have set for the Parcels. Questions will be raised about toughening comps, the sustainability of Express momentum, and the surprising weakness in Ground margins as the search for a normalized EPS level continues,” said Ravi Shanker, equity analyst at Morgan Stanley.

“We see EBIT growth through YE of FY21 driven by both margin improvement and vol. driven rev. growth which is helped by limited Airfreight capacity and an eCommerce surge, though yields are mixed. We continue to see secular threats to Parcel and remain sceptical that these trends will be sustainable but believe that until there is evidence of a reversal in earnings momentum, the stock can trade at its historical multiple (14x PE) on current EPS,” Shanker added.

Upside and Downside Risks

Risks to Upside: 1) Variable cost structure better positions FDX vs. UPS in a secular battle for B2C and in choppy macro. 2)  Cost-cutting efforts should support improved returns. 3) Investor sentiment is low, multiple has reset lower – highlighted by Morgan Stanley.

Risks to Downside: 1) As one of the international trade-exposed companies we cover, FDX is exposed to macro/tariff risks. 2) After the breakup with AMZN, FDX is reliant on others for eCommerce growth. 3) Potential USPS reform.

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