Is FedEx Enticing Post Earnings?

With shares of FedEx (NYSE:FDX) trading around $147, is FDX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

FedEx provides transportation, e-commerce, and business services in the United States and internationally. Transportation is improving, so businesses and consumers are increasing their interest in transacting worldwide. Gasoline prices and vehicle efficiency tend to have a significant impact on the company, so watch for improvements in these areas. As boundaries on international commerce blur, look for companies like FedEx to be able to provide the shipping services required across the globe.

Even people who don’t send many packages via FedEx should welcome the news on Wednesday that the company is doing better. The shipping business tends to correspond when the overall economy improves — when things are looking up for businesses overall, they send more stuff. Many investors look to FedEx’s quarterly earnings reports as a yard stick of sorts. FedEx beat expectations in its most recent quarter. Revenue and profits are up and expenses are down. It doesn’t get much better than that for a company.

T = Technicals on the Stock Chart Are Strong

FedEx stock has been moving higher over the last couple of years. The stock is currently trading near all-time highs and looks poised to continue. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, FedEx is trading above its rising key averages, which signals neutral to bullish price action in the near-term.

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of FedEx options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

FedEx options

17.61%

0%

0%

What does this mean? This means that investors or traders are buying a very small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of Wednesday, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on FedEx’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for FedEx look like and more importantly, how did the markets like these numbers?

2014 Q1

2013 Q4

2013 Q3

2013 Q2

Earnings Growth (Y-O-Y)

15.49%

8.85%

12.95%

5.52%

Revenue Growth (Y-O-Y)

3.51%

3.20%

2.61%

2.13%

Earnings Reaction

5.12%*

-0.13%

0.45%

5.03%

* As of this writing

FedEx has seen increasing earnings and revenue figures over the last four quarters. From these numbers, the markets have been pleased with FedEx’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has FedEx stock done relative to its peers – United Parcel Service (NYSE:UPS), Air Transport Services Group (NASDAQ:ATSG), and Air T (NASDAQ:AIRT) — and sector?

FedEx

United Parcel Service

Air Transport Services Group

Air T

Sector

Year-to-Date Return

2.46%

-2.63%

3.34%

6.35%

3.38%

FedEx has been an average performer, year-to-date.

Conclusion

FedEx provides valuable and efficient transportation services to growing industries around the world. The company beat expectations in its most recent quarter. The stock has been moving higher over the last couple of years and is currently trading near all-time highs. Over the last four quarters, earnings and revenues have been increasing, which has left investors pleased. Relative to its peers and sector, FedEx has been an average year-to-date performer. Look for FedEx to OUTPERFORM.

Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

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