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“It takes a great deal of bravery to stand up to our enemies, but just as much to stand up to our friends.” – JK Rowling
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
New highs for the S&P 500 are increasingly coming up on the horizon as the S&P 500 is on pace to open within 0.5% of its record closing high in February, but between here and there, we have a slew of data and Fed speakers to get through. Leading up to those reports at 8:30 and 10, Treasury yields are fractionally lower, while crude oil and gold are fractionally higher, and the dollar is lower.
FedEx (FDX) reported earnings after the close on Tuesday, and despite better-than-expected EPS and sales, the stock fell 3.3% in reaction to its report on Wednesday. The table below shows how FDX has reacted to earnings over the last four years, and the results haven’t been positive. Over this period, this week’s report was only the third time FDX reported better-than-expected EPS and sales for the same quarter. While the company has reported better-than-expected EPS 10 times in the last 16 quarters, it has only exceeded sales forecasts six times. The company’s inability to consistently exceed expectations, particularly in terms of revenue, suggests that management has a significant problem in managing Wall Street’s expectations. It also appears that investors have become increasingly frustrated with the company, as the stock has now experienced four consecutive negative reactions to earnings.
The one-year price chart of FDX also doesn’t look good. Each of the red arrows below indicates when FDX reported earnings. Even outside of those four days, the stock has seen a steady slide lower, falling from over $300 to the low $200s. For years, FDX was considered a leading indicator for the economy as its transportation network was among the largest in the world. A slowdown in FDX’s business signaled a slowdown in the economy and vice versa. Given that logic, should investors be concerned about the ongoing weakness in FDX’s results and share price reaction?
