FedEx Stock Price Gains 5% On Revenue Beat

on Mar 19, 2020
Updated: Apr 3, 2020
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  • Earnings: $1.41 per share vs $1.41 per share expected
  • Revenue: $17.5 billion vs $16.89 billion expected
  • FedEx suspends 2020 project outlook due to the uncertainty amid the coronavirus outbreak
  • Stock price mildly recovers after printing a 7-year low

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Shares of FedEx (NYSE:FDX) rallied 5% yesterday, despite another major selloff in equities, after the package delivery company reported results for its third fiscal quarter.

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Fundamental analysis: 2020 profit outlook suspended

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FedEx announced its net income of $371 million, or $1.41 per share, for the fiscal third quarter which ended Feb. 29, in line with market expectations. However, the reported net income represents a decrease by 53.5% on the year-over-year basis.

As expected, the coronavirus outbreak has hit the package delivery company hard, and forced it to suspend fiscal 2020 earnings forecast due to uncertainty.

“The COVID-19 pandemic is having a significant impact around the world,” said Frederick W. Smith, FedEx Corp. chairman and chief executive officer. “We continue to deliver for our customers and are ready to support increased demand for our International Express export services due to the significant reductions in intercontinental air capacity.”

Revenue for the third-quarter rose around 3% to $17.5 billion, higher than the $16.89 billion expected by Wall Street, and $17 billion a year ago.

However, the company is finding itself in an extremely difficult situation nowadays, and it has submitted a request to the U.S. administration for “liquidity support”.

“To mitigate these near-term headwinds and position the company for future earnings growth, we are attacking costs throughout the company by managing capacity, retiring our oldest and least-efficient aircraft,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer.

Despite a revenue beat, analysts are still overwhelmed by market developments in the past few weeks.

“The reaction to their release is a bit like driving looking through the rear-view window,” said Trip Miller, managing partner at Memphis-based Gullane Capital Partners. “There wasn’t much in there for me to feel positive about FedEx or anybody else in the next 60 days.”

Technical analysis: Multi-year lows printed

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This week’s low of $88.69 is the lowest the FedEx shares have traded since 2012. Despite a bounce yesterday on the revenue beat, the risk is still to the downside for the FedEx stock price. Overall, the stock trades around 45% lower since the beginning of the selloff.

FedEx (FDX) weekly chart (TradingView)

A break of the descending wedge around the $130 mark has accelerated the drop, which has also seen the price action trade below both 100 and 200 monthly moving average, as well as one of the two key horizontal supports at $120.

The second one is located at $97.50 and it is currently put to the test. A break of this level is likely to open the door for more losses, with the next support sitting at around the $87 handle.

Summary

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FedEx shares staged a mild recovery yesterday, after the company posted better-than-expected revenue figures, while earnings were in line with Wall Street expectations. The company has suspended its 2020 profit outlook due to the coronavirus-related uncertainty.

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