A Look Ahead to FedEx's Tuesday Earnings Report
It's hard to believe that companies will close their books on the third-quarter at the end of this month, but a few high-profile earnings reports still loom on the horizon this week, including package delivery giant FedEx (NYSE: FDX).
Fedex's recent lackluster price performance can mostly be attributed to shaky fundamentals. Year-over-year sales growth has been slowing in recent quarters due to slack demand. Sales growth is expected to decelerate again when the company reports Tuesday before the open. Sales are seen rising 2% to $10.7 billion. The Thomson Reuters consensus estimate calls for profit of $1.46 a share, down 3% from a year ago.
Valuation-wise, FedEx is compelling. It currently sells at 14 times trailing earnings and 11 times forward earnings. Full-year profit this year is seen rising 7% from 2011 to $7.04 a share. Next year, growth is seen accelerating, rising 17% to $8.26 a share.
FedEx's recent price performance leaves a lot to be desired. While emerging leaders have been breaking out left and right, FedEx can't get out of its own way. The stock has been a laggard for a while now, but with overall market sentiment on the mend, buyers could start coming into FedEx soon, depending on what the company has to say about worldwide demand going forward.
The bulls will say that FedEx has made it through the worst of it. Europe seems to be getting its house in order. On the home front, the Fed just announced another round of quantitative easing to stimulate the economy and get job growth back on tract.
The bears, however, say the worldwide economy is still vulnerable. This argument carries weight as well because no one really knows what the end result of recent actions by Draghi and Bernanke will look like. Several countries in the Eurozone remain in recession and the U.S. economy still faces many hurdles.
A look at FedEx's chart shows a big base that started in mid-February. Its technical picture would improve quite a bit if the stock is able to clear current resistance at $93.17, its intraday high set on July 19. If Wall Street likes what it hears from FedEx on Tuesday, an upside breakout can't be ruled out. Keep in mind that institutional buying is the fuel for any successful breakout. If buyers come into FedEx soon, make sure volume expands. That would be a sign that institutions are buying.
Support looks to be strong for FedEx in $84 area. It's been holding above that price level since June. Shares of FedEx closed Friday at $90.15, down $0.21.
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