Market Overview

Earnings Preview: FedEx & How To Trade It

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FedEx Corporation (NYSE: FDX) shares are higher today, gaining 2%, but the real action will come tomorrow, when the Memphis-based company reported earnings.

FedEx, led by CEO Fred Smith, is expected to report earnings of $1.72 per share on $10.72 billion in revenues. This is up from last year, when FedEx reported $1.33 per share on $9.43 billion in revenues. Revenues would grow approximately 11% year-over-year after the company if FedEx is able to meet, or beat these numbers.

Next quarters guidance will be extremely important, as many are worrying that the economy is slowing down. If FedEx reports strong guidance, then perhaps some of these fears will be relieved. FedEx is expected to guide $1.41 per share on $10.32 billion for next quarter.

Deutsche Bank is one bank that believes that FedEx is oversold at these levels, and added the stock to its Short-term Buy list this morning. Deutsche Bank has a $133 price target, some 50% away from current levels.

As economic conditions have worsened, shares of FedEx have gotten cheaper, and are now trading under 14 times next year's earnings, historically cheap. The company is expanding into Asia faster than its competitor UPS (NYSE: UPS), and as such, has always traded at a premium to UPS. Because of the expansion in Asia, FedEx will benefit from a weaker dollar when it reports its earnings in U.S. dollar terms.

If FedEx is able to beat earnings and provide strong guidance, then UPS, along with other transports, such as CSX (NYSE: CSX), Union Pacific (NYSE: UNP), and to a lesser extent Arkansas Best Corporation (NASDAQ: ABFS) and Con-way Inc. (NYSE: CNW) should benefit.

FewdEx may deliver strong results tomorrow, and adding shares at these levels may deliver strong profits to your portfolio.

 

Related Articles (ABFS + CNW)

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