A Deeper Dive into the Business Drivers for FedEx This Quarter

FedEx (NYSE:FDX) is a rare company which gives investors a 10,000 foot view of global economic activity. The more widgets moving from one place to another, the healthier the economy.

This morning FedEx announced positive earnings (See “FedEx Earnings Cheat Sheet: Fifth Consecutive Quarter of Double-Digit Revenue Growth“). But what can we learn from looking under the headlines?

First, FedEx issued an upbeat forecast for the remainder of 2012. The shipping company says they see an improving global economy and growing demand for shipping services. This data point alone should prevent you from listening to the apocalyptic bears.

Second, FedEx customers sent a higher volume of packages last quarter. That’s excellent news. Specifically, ground and international express shipping outperformed. A rise in international express shipping is a particularly heartening datapoint for general global economic health (Cf. one or two countries powering the entire need for logistics).

Third, FedEx CEO Frederick Smith sung music to investors ears when he noted, “With this positive momentum, moderate economic growth and subsiding cost headwinds, FedEx is well positioned to deliver strong earnings growth in fiscal 2012.” Take notice that the company believes fuel (NYSE:USO) costs will subside in the near term. This is another strong reason to assume next quarter’s earnings season may not be as horrible as many talking heads are warning. The tune of earnings season may be more about “lower fuel and shipping costs leading into the holiday season.” That would be a positive for Wall Street.

The next bellwether to look for is UPS (NYSE:UPS) earnings currently scheduled for July 26th.

FedEx was a Wall St. Cheat Sheet watch list stock: Check Out Wall St. Cheat Sheet’s newest Feature Trades of the Month!