Fedex hits a roadblock

The courier will announce its first-quarter results on 16 September, and the stock is driving lower.

FedEx delivery truck
Source: Bloomberg

FedEx has witnessed a drop in share price since June, and we have yet to see any sign of a recovery so far. The courier business posted a fourth-quarter loss of $895 million but that was largely attributed to the non-cash mark-to market charges of $2.2 billion relating to pensions. Even when you exclude the one-off pension adjustment, both the final-quarter revenue and earnings per share marginally missed analysts.

FedEx benefitted greatly from the fuel surcharges it imposed on clients in 2014 when energy prices were high, but now the price of oil has plummeted, those have disappeared. It is now clear how much FedEx came to depend on those charges, and seeing as those charges will not be added in the near future the stock is coming under pressure.  

The EU antitrust is still reviewing FedEx’s takeover offer for TNT, and an answer will be given by January 2016. The European body rejected USB’s takeover attempt of TNT in 2013 on the grounds it would lead to less competition in Europe. It may be a blessing in disguise if the takeover bid is knocked back since FedEx’s share price has suffered since the summer.

When FedEx reveals its first-quarter results, traders are expecting revenue of $12.29 billion and EPS of $2.45. In the final quarter of 2015, the company posted revenue and EPS of $12.11 billion and $2.66 respectively. FedEx will announce its full-year figures in June 2016, and dealers are anticipating revenue of $50.38 billion and EPS of $10.86, and that represents a 6.1% rise in revenue, and a 21% rise in EPS.

Equity analysts are very bullish on FedEx, and out of the 30 recommendations, 18 are buys, 11 are holds, and one is a sell. The average target price is $195, and that is 29% above the current price.

The number of short positions on FedEx has dropped by 6.4% since the company revealed its fourth-quarter numbers in June.

After printing an all-time high in June, Fedex’s stock has endured a big sell-off, and the support at $145 is the downside target. If that level is taken out the August low of $130.06 will then be the next major support level. The $153 area has proved to be barrier to any rallies recently, but a move above it bring the resistance at $163 into play. 

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