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.

Check out FX Empire’s earnings calendar

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

Earnings Calendar For The Week Of December 14

Monday (December 14)

No major earnings scheduled for release.

However, it is worth noting HEXO Corp, a Canada-based company that creates and distributes products to serve the Canadian cannabis market, will release its financial results for the fiscal first quarter 2021 on Monday before the stock market opens.

Hexo earnings will provide a direction for the emerging cannabis industry. Failing to grow on earnings and revenue after consolidation, will lead to a worse stock dilution scenario for the company. Hexo’s statement will test market sentiments on Monday for the higher-risk, higher-reward cannabis sector.

Tuesday (December 15)

Ticker Company EPS Forecast
SHB Shaftesbury -£1.52
NDSN Nordson $1.53
HOCPY Hoya Corp $0.74

 

Wednesday (December 16)

IN THE SPOTLIGHT: LENNAR

LENNAR: Lennar, a home construction and real estate company, is expected to report a profit of $2.35 in the fourth quarter, up from $2.13 per share seen in the same quarter a year ago, which would indicate a positive year-over-year growth rate of more than 11%.

According to Zacks Research, equity strategists forecasts full-year earnings of $7.46 per share for the current financial year, with EPS estimates between $7.39 to $7.53. For the next financial year, strategists expect the company will post earnings of $7.97 per share, with EPS estimates between $6.30 to $9.42.

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

Ticker Company EPS Forecast
TTC Toro $0.49
ABM ABM Industries $0.70
MLHR Herman Miller $0.57
MU Micron Technology $0.70
AUOTY AU Optronics $0.09

 

Thursday (December 17)

IN THE SPOTLIGHT: FEDEX

FedEx, the world’s leading express delivery company, is expected to report a profit of $3.93 in the second quarter, down from the previous $4.87. The company has a decent earnings history as its bottom line outshined the consensus mark in two of the trailing four quarters and missed the same in the remaining two. The average beat is 37.7%, according to Zacks Investment Research.

The continued surge in e-commerce demand during the current coronavirus-ravaged times is likely to have boosted revenues in the to-be-reported quarter. With the pandemic largely restricting people to their homes, the need for door-to-door delivery of essentials during this unprecedented crisis is rising, according to Zacks Investment Research.

“E-commerce trends remain robust, which should support results, but the bar is much higher too. All eyes will be on two major areas: (1) more evidence of the breaking wave that could set up a challenging F2H21/2022 and (2) what is peak season going to look like as we have even less visibility than usual,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“We expect a beat for F2Q21 vs. current consensus. We are modelling EPS of $4.09 (adj for TNT integration costs), 10% above cons. of $3.73. Our FY21 EPS of $17.80 is slightly below our prior est. of $18.08 but is 12% above cons. of $15.89 (all adj. for TNT integration costs for comparability). The main drivers of the beat are a continued strong pricing environment in Express International esp. in Freight as well as more a more spread out peak season in Ground as retailers attempt to avoid service breakdowns and surcharges. This will benefit volume and F2Q results at the cost of pricing and F3Q results, in our view,” Shanker added.

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

Ticker Company EPS Forecast
WB Weibo $0.62
ACN Accenture $2.05
GIS General Mills $0.97
JBL Jabil Circuit $1.27
SAFM Sanderson Farms -$0.03
WOR Worthington Industries $0.69
RLAY Relay Therapeutics Inc. -$0.32
ASEKY Aisin Seiki Co $0.42

 

Friday (December 18)

IN THE SPOTLIGHT: DARDEN RESTAURANTS

Darden, which operates full-service restaurants in the United States and Canada, is expected to report a profit of $0.71 in the second quarter, up from the previous $0.56. The Orlando-based multi-brand restaurant operator has set its Q2 2021 pre-market guidance at 0.65-0.75 EPS.

“Darden will report 2Q21 (November) results on December 18th, before market open. We model adjusted EPS of $0.68, below the midpoint of $0.65 to $0.75 guidance and$0.73 consensus, though our below-consensus positioning is not purposeful. Compared to consensus, we model lower restaurant-level margins of 18.9% vs 19.4% Consensus Metrix, which is partially offset by our lower G&A estimate,” said Andrew M. Charles, equity analyst at Cowen and Company.

“We model a revenue decline of 17.5%, which compares to the guidance of -18% total revenue and Consensus Metrix -17.1% and contemplates Olive Garden and Longhorn same-store sales -15% and -10% vs Consensus Metrix -16% and -11%, respectively. At the time of the1Q21 earnings release, Darden indicated that the company was running modestly ahead of-18% guidance and the guidance contemplated 100 bps of headwind from the Thanksgiving calendar shift. We believe what looked like conservative sales guidance when issued in September now looks fair. Indeed, we point to the stability of sales suggested by industry data from September through November, commentary from Mr. Manocha around dining rooms restrictions helping to transfer sales to off-premise channels, and Darden’s lack of third-party delivery availability amid November’s rise in COVID-19 cases/dining room capacity restrictions,” M. Charles added.

IN THE SPOTLIGHT: NIKE

Nike, the largest seller of athletic footwear and apparel in the world, is expected to report a profit of $0.62 in the second quarter, down from the previous $0.95.

“A faster North America wholesale restart, transitory GM benefits, SG&A control, & lean inventory suggest 2Q upside. Valuation nears highs, but Nike’s more promising revenue and margin outlook post-COVID-19 should continue to drive the stock higher. Lift price target to $165,” noted Kimberly Greenberger, equity analyst at Morgan Stanley.

“Further, despite Nike’s valuation nearing the upper end of its historical range (37x 2022e consensus P/E vs. 19-38x historical range) as well as its impressive YTD stock run (+35% vs. S&P 500 +14% as of 12/4), we see room for additional share price appreciation on 1) positive EPS revisions on potential upside surprise to the upcoming quarter as well as against management’s seemingly conservative full year (May-21 year) guidance (as outlined in our four key points below), 2) Nike’s relevant exposure to activewear, one of the fastest-growing footwear & apparel categories, a trend which has only been accelerated by COVID-19, and should remain an ongoing tailwind, and 3) Nike’s accelerated shift to its DTC channel, and in particular eCommerce, which should enhance its long-term revenue, margin, and EPS growth,” Greenberger added.

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

Ticker Company EPS Forecast
DRI Darden Restaurants $0.71
NKE Nike $0.62
CUK Carnival -$1.88
CCL Carnival -$1.88
CCL Carnival -£1.43

 

Fedex Hits 20-Month High After Surcharge News

Fedex Corp. (FDX) has booked substantial upside since March, ending a multiyear downtrend that accelerated after Amazon.Com Inc. (AMZN) revealed it would bring deliveries in-house through a new shipping division. The stock posted an 8-year low and turned higher into April when AMZN reversed gears, returning a fair share of packages to third party carriers so it could concentrate on surging demand, in reaction to the COVID-19 pandemic.

Fedex Adds Fourth Quarter Surcharges

The shipping giant is still trading nearly 70 points below January 2018’s all-time high at 275, despite the 117-point advance into August, telling market watchers it will take months before the former market leader can post a new high. It took a big step in that direction on Tuesday morning, instituting seasonal peak surcharges and fees that will add substantially to revenue between October and mid-January.

A company statement justified the surcharges, noting “FedEx continues to keep commerce moving and delivering critical shipments to homes during the COVID-19 pandemic. As the impact of the virus continues to generate a surge in residential deliveries, we are entering this holiday peak season with extremely high demand for capacity and are experiencing increased operating costs across our network. We anticipate residential volume to continue to surge into the New Year.”

Wall Street And Technical Outlook

Wall Street consensus has improved in recent months, with a ‘Moderate Buy’ rating based upon 14 ‘Buy’ and 8 ‘Hold’ recommendations. No analysts are telling shareholders to close positions and move to the sidelines at this time.  Price targets currently range from a low of $100 to a street-high $235 while the stock opened Tuesday’s session just $19 below the high target. It will be tough for Fedex to add to gains with this placement, but this morning’s news could generate higher targets.

Fedex lifted above the 200-day moving average for the first time since October 2018 in June, signaling a new uptrend. The 5-month uptick has now reached strong resistance just above 200, predicting that price action will roll into a sideways pattern or pullback that shakes out weak hands. A decline into the moving average, currently in the 150s, could offer a low risk entry in this scenario, underpinned by accumulation readings that have now hit new highs.

FedEx Soars After Stronger-Than-Expected Quarter

FedEx Corp. (FDX) is trading higher by more than 15% in Wednesday’s U.S. session after beating top and bottom line fiscal Q4 2020 estimates. $2.53 earnings-per-share (EPS) blew away expectations by $0.91 while $17.36 billion in revenue surpassed estimates by $800 million. Even so, year-over-year revenue fell 2.5% due to lower volumes as a result of the COVID-19 pandemic. The stock is now trading above 150 for the first time since February 25.

FedEx Headwinds

Amazon.Com Inc. (AMZN) announced it would bring the majority of package deliveries in-house to cut costs in 2018, setting off a FedEx downtrend that posted a 7-year low in March 2020. The e-commerce giant reversed gears in the second quarter and is once again farming out a fair share of deliveries to shipping rivals. This turnaround and the reopening of key markets benefited quarterly results, while increasing optimism about a post-pandemic business revival.

FedEx issued subdued commentary about the quarterly results, warning that “virtually all revenue and expense line items were affected by the COVID-19 pandemic during the quarter. While commercial volumes were down significantly due to business closures across the globe, there were surges in residential deliveries at FedEx Ground and in transpacific and charter flights at FedEx Express, which required incremental costs to serve.”

Wall Street And Technical Outlook

JPMorgan. Raymond James, Cowen, Bernstein, and Credit Suisse upgraded the stock on Wednesday while 9 other analysts issued upbeat opinions and/or raised price targets. Morgan’s Brian Ossenbeck summed up fresh enthusiasm, noting that “ground remains in the driver’s seat at FedEx as the fastest growing and most profitable business segment with opportunities to improve margins by consolidating ISPs, redirecting SmartPost, and leveraging efficiency gains”.

Price action has a long way to go to restore the bullish outlook, despite this week’s big advance. The stock is still trading more than 10 points below the 200-day moving average at 172, which marks the dividing line between bull and bear power. It also needs to add another few points to end the long string of lower highs in place since June 2018. Given those technical headwinds, investors may choose to wait and watch for a string of rally days before taking exposure.

FedEx Q4 Result Beats Expectations; Shares Soar About 10%

FedEx Corporation, an American multinational delivery services company headquartered in Tennessee, has reported better-than-expected fourth-quarter revenue and profit as demand for contactless home deliveries surged amid COVID-19 pandemic, sending shares of the leading delivery services company up about 10%.

Adjusted profit at Tennessee-based delivery services company slumped by nearly 50% to $663 million, or $2.53 per share. FedEx revenue for the fourth quarter dipped to $17.4 billion from $17.8 billion recorded a year ago. That beat the average forecast of $1.42 per share by analysts surveyed by Zacks Investment Research.

FedEx Ground’s revenue increased 20% but its operating income fell about 17% in the fourth quarter. Revenue for FedEx Express dipped 10% and operating income slumped over 50%.

FedEx said that all revenue and expense line items were affected by the COVID-19 pandemic during the quarter. While commercial volumes were down significantly due to business closures across the globe, there were surges in residential deliveries at FedEx Ground and in transpacific and charter flights at FedEx Express, which required incremental costs to serve.

“Though our fiscal fourth-quarter performance was severely affected by the COVID-19 pandemic, I am extremely proud of the herculean efforts of our team members,” Frederick W. Smith, FedEx Corp. chairman and CEO said in a press release.

“With safety as the first priority, these men and women provided essential transportation of critical supplies across the globe and delivered peak-level e-commerce volumes in the United States. As a result of the strategic investments we have made to enhance our capabilities and efficiencies, FedEx is well-positioned to support and benefit from the reopening of the global economy.”
The delivery company did not provide earnings forecast for fiscal year 2021 as the timing and pace of an economic recovery are uncertain.

Following the results report, FedEx share jumped about 10% in after-market trading. However, that is below its record high of $250 seen in October 2017.

FedEx outlook and price target

Fifteen analysts forecast the average price in 12 months at $143.36 with a high of $160.00 and a low of $98.00. The average price target represents a 2.24% increase from Tuesday’s price of $140.22, according to Tipranks. From that 15, six analysts rated ‘Buy’, nine rated ‘Hold’ and none rated ‘Sell’.

Cowen and Company raised target price to $167 from $156, UBS raised price target to $158 from $135, JP Morgan raised target price to $145 from $115, Credit Suisse raised price target to $150 from $121 and Citigroup raised price target to $160 from $140. Morgan Stanley target price is $98 with a high of $153 under a bull scenario and $54 under the worst-case scenario.

Analyst comment

“We see secular competitive risks to Parcels from a triple threat of (1) Insourcing by e-commerce giants, (2) Omnichannel shift enabling last-mile competition from mid-size retailers, and (3) Platformization of small-shipper volumes. Together, these trends could erode returns in the B2C space, which has been a major driver of growth for the legacy Parcels in recent years,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“We see FDX as relatively better positioned than UPS due to its smaller eCommerce exposure, lack of AMZN business and unionization, an outsourced Ground operation, and potentially more self-help opportunities. In addition to the secular risks, tough macro conditions and execution are likely to keep earnings under pressure,” he added.

The Week Ahead – US Jobs Report, Fed Minutes, Global PMIs, UK Q1 GDP in Focus

US employment reports (June) – 02/07

After the loss of a record 20m jobs in April, expectations were high that May’s non-farm payrolls report would produce further job losses in the millions. This turned out to be far from true, as the numbers for May confounded expectations with 2.5m jobs added, breaking another record for jobs gained in the process. We’ve seen significant divergence in the wider health of the US economy and ergo the labour market in recent weeks.

It would appear that the return of furloughed employees in May helped dilute the effect of the mass job losses in April, with the resulting upturn in some of the consumption data, like retail sales, pointing to a decent economic rebound. The big question is whether this rebound can continue into June, at a time when continuing claims remain stubbornly high, close to the 20m level. Expectations are for this trend to continue, not only in the official non-farm payrolls, but also in the ADP report, which is due on Wednesday. Estimates are for 3.6m jobs to be added back to the US labour market in Thursday’s non-farms, with the ADP report predicted to show job gains of 2m. The unemployment rate is expected to fall back to 12% from 13.3%.

US Federal Reserve minutes – 01/07

the US Federal Reserve rate-meeting in June turned out to be every bit as dovish as expected. Fed chair Jay Powell expressed particular concern about inequality, which he said could continue for the next four decades, and that millions of people could be out of work for some time. Against such a dark outlook he went on to say that it wasn’t the Fed’s role to care about asset prices and whether they were too high, saying the central bank’s main role was to support the US economy and keep the financial system afloat.

Despite some encouraging economic data since the 10 June meeting, Mr Powell has remained insistent that it’s too early to draw too many conclusions this early in the crisis. Wednesday’s minutes should offer insight into the discussions over various measures taken by the FOMC, including their concerns about a second wave and the health of the US banking system. In the face of consumer and business defaults, it will be interesting to discover whether there was any discussion over the recent surprise intervention in the corporate bond market, which many considered unnecessary.

UK Final GDP (Q1) – 30/06

Final Q1 GDP numbers are unlikely to tell us anything new about the UK economy’s performance at the beginning of the year. The economy was slowing even before the March lockdown, largely due to widespread flooding in February, which hit consumer spending. On a quarterly basis, the economy is expected to contract by -2%, and on an annual basis by -1.7%. The lockdowns that started across Europe in March are expected to result in big declines in both imports and exports, which are expected to fall -10.8% and -5.3% respectively.

Global Manufacturing PMIs – 01/07

The manufacturing sector has proved to be much more resilient than the services sector, even though it has still suffered from the economic shutdowns of the past few weeks. Any rebound here is likely to be muted, given that services activity remains subdued. Backlogs of existing products, such as unsold cars and other manufactured products, will need to be worked off before manufacturing can restart in earnest. There should be improvements from the levels in May, if last week’s flash PMIs from the US, UK, Germany and France are any guide.

Global Services PMIs (June) – 03/07

After the horror show of the recent record low levels in April’s services purchasing manager indices (PMI) numbers, there’s been a steady recovery, with the rebound in May expected to gain further traction in the June data, as the various economies continue their reopening processes. Last week’s flash PMIs from Germany, France and the UK would appear to bear this out, despite concerns about a second wave of infections prompting some concern.

The biggest fear remain around the tourism sector for Spain and Italy, who rely so much on tourism in their services sector, and who are accelerating the opening of their economies to try and generate some form of revenue this year. The flash PMIs showed a continuation of the improvements from May, and are expected to come in at 50.3, 45.8 and 47 respectively for Germany, France and the UK, though there could be upward adjustments. Spain and Italy are also expected to improve from 27.9 and 28.9 respectively in May, but the figures won’t change the prospect of a significant economic contraction in Q2.

Sainsbury’s Q1 (FY21) results – 01/07

Supermarkets have been one of the few businesses that have managed to avoid the worst of the coronavirus pandemic. While supermarket peer, Tesco, attracted criticism for not deferring its dividend, Sainsbury’s was slightly more cautious when it released its full-year numbers at the end of April, deferring a dividend decision until the end of the year. A £500m increase in costs has offset the spike in grocery sales as a result of panic buying in March and beginning of April, while additional safeguarding measures for its staff has also acted as a headwind.

That spike in sales continued into May with an 11% rise in sales year-on-year, as shoppers gravitated towards the big two supermarkets on the basis of a wider range of products and bigger spend. It also helped that Sainsbury’s online operation, due to its Argos acquisition, has a lot more resilience, but there are still weaknesses in its proposition. Unlike Tesco, it has held on to its bank, and with a tough macroeconomic outlook that could be a drag on profitability, though it does have the added cushion of a £450m saving in business rates. It’s clear that Sainsbury’s new CEO, Simon Roberts, will need to do a lot better than his predecessor if he wants to close the gap with Tesco in the years ahead.

Constellation Brands Q1 (FY21) results – 01/07

The closure of bars, pubs and restaurants will have hit sales across all of its brands, even accounting for increased sales from supermarkets, off-licences and liquor stores, as a result of the various lockdowns. In March, Constellation Brands pulled its guidance for the upcoming year in the wake of the uncertainty over coronavirus, despite beating Q4 earnings. The company is also behind Corona beer, which has seen sales fall over its name association with the virus. A particular drag on its profitability was its stake in Canadian cannabis company, Canopy Growth, after it posted a full-year loss of $576m. To offset this, Constellation CFO Gareth Hankinson said the company expects to receive $850m from the sale of Gallo Wines. Despite lockdowns globally, Q1 profit is estimated to come in at $2.10 a share.

Germany Unemployment (June) – 01/07

Having been lauded for both its medical and fiscal response to the coronavirus crisis, Germany has been fortunate that the economic damage in terms of unemployment appears to have been limited. Since March, unemployment has only risen from 5% to 6.3%, which seems extraordinarily low when you consider the economic damage wrought across Europe in recent weeks. Over the last two months, claims for unemployment have risen by 610,000, which in a country of 80 million seems on the low side, and these figures could escalate in the coming months.

FedEx Q4 (FY20) results – 30/06

FedEx suspended its full-year outlook in March, citing the significant impact of coronavirus, despite posting an increase in quarterly revenue that beat market expectations. The loss of its Amazon contract was a big blow earlier in the fiscal year, however revenue still remained fairly resilient. On the flip side, the enforced shutdowns have seen an explosion in online shopping, which should translate into a significant pickup in deliveries across all of its regions. Even in freight you would expect to see a rebound, as companies safeguard their supply chains. This should see profit come in above Q3, with expectations of $1.87 a share, up from $1.41.

Japanese Tankan survey (Q2) – 01/07

With the Japanese economy just coming out of a state of emergency at the same time as fluctuating infection rates, it’s hard to get a gauge of how business optimism is likely to change in the months ahead. This week’s latest Tankan survey will have to deal with the prospect that economic activity could take a lot longer to return to normal, with the possibility that the 2021 postponement of the Olympics could turn into a wholesale cancellation, unless the Japanese government can get on top of the wider infection rate. All of the main surveys are predicted to see even larger declines than in the first quarter, though remaining well above the worst levels in the wake of the 2008 financial crisis, with manufacturing much more pessimistic than the non-manufacturing surveys.

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

By Michael Hewson (Chief Market Analyst at CMC Markets UK)