FedEx Soars After Stronger-Than-Expected Quarter

FedEx Corp. (FDX) is trading higher by more than 15% in Wednesday’s U.S. session after beating top and bottom line fiscal Q4 2020 estimates. $2.53 earnings-per-share (EPS) blew away expectations by $0.91 while $17.36 billion in revenue surpassed estimates by $800 million. Even so, year-over-year revenue fell 2.5% due to lower volumes as a result of the COVID-19 pandemic. The stock is now trading above 150 for the first time since February 25.

FedEx Headwinds

Amazon.Com Inc. (AMZN) announced it would bring the majority of package deliveries in-house to cut costs in 2018, setting off a FedEx downtrend that posted a 7-year low in March 2020. The e-commerce giant reversed gears in the second quarter and is once again farming out a fair share of deliveries to shipping rivals. This turnaround and the reopening of key markets benefited quarterly results, while increasing optimism about a post-pandemic business revival.

FedEx issued subdued commentary about the quarterly results, warning that “virtually all revenue and expense line items were affected by the COVID-19 pandemic during the quarter. While commercial volumes were down significantly due to business closures across the globe, there were surges in residential deliveries at FedEx Ground and in transpacific and charter flights at FedEx Express, which required incremental costs to serve.”

Wall Street And Technical Outlook

JPMorgan. Raymond James, Cowen, Bernstein, and Credit Suisse upgraded the stock on Wednesday while 9 other analysts issued upbeat opinions and/or raised price targets. Morgan’s Brian Ossenbeck summed up fresh enthusiasm, noting that “ground remains in the driver’s seat at FedEx as the fastest growing and most profitable business segment with opportunities to improve margins by consolidating ISPs, redirecting SmartPost, and leveraging efficiency gains”.

Price action has a long way to go to restore the bullish outlook, despite this week’s big advance. The stock is still trading more than 10 points below the 200-day moving average at 172, which marks the dividing line between bull and bear power. It also needs to add another few points to end the long string of lower highs in place since June 2018. Given those technical headwinds, investors may choose to wait and watch for a string of rally days before taking exposure.