Is FedEx Stock Gaining Ground?

With shares of FedEx (NYSE:FDX) trading around $97, 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. As boundaries on international commerce blur, look for companies like FedEx to be able to provide the shipping services required across the globe.

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Head on over to the next page to explore the technical landscape of FedEx’s stock…

T = Technicals on the Stock Chart are Improving

FedEx has slowed in recent years from its multi-year uptrend. The stock looks to have just broken above a downtrend that extended back to 2005. Let’s identify a price trend and its strength 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 below, FedEx is not trading above its key averages but it is holding the 100-day simple moving average. FedEx stock may be pausing at these levels before heading higher.

FDX

(Source: Thinkorswim)

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Taking a look at the implied volatility and implied volatility skew levels of FedEx options may help determine if investors are bullish, neutral, or bearish. As seen in the price chart above, the implied volatility (red) of FedEx options is at 20.32 percent today which coincides with a zero percentile over the last 30 trading days and fifth percentile over the last 90 trading days. 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.

The implied volatility skew of April and May put and call options is at average levels. So as of today, there is an average demand from call buyers or sellers and put buyers or sellers, all neutral over the next two months. Investors are buying a minimal amount of call and put option contracts and are leaning neutral 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 Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising growth rates. What do the last four quarterly earnings and revenue growth figures for FedEx look like? The last four quarterly earnings growth (Y-O-Y) rates have been:-31.52, -11.46, -0.68, and -1.14 percent while the last four revenue growth (Y-O-Y) rates have all been: 3.68, 4.91, 2.58, and 4.32 percent. FedEx has shown great signs on revenue growth but may be getting squeezed on earnings growth.

More importantly, how did the markets take these numbers? The last four quarterly earnings announcement reactions help gauge investor sentiment on FedEx’s stock. The last four quarters have seen next trading session returns of -6.88, 0.9, -3.05, and 2.81 percent. The markets have not been too convinced by FedEx’s earnings reports.

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P = Poor Relative Performance Versus Peers and Sector

How has FedEx stock done relative to its peers and sector? Year-to-date, the stock is returning 3.68 percent while its competitors, United Parcel Service (NYSE:UPS), Air Transport Services (NASDAQ:ATSG), Air T (NASDAQ:AIRT), and sector are returning 11.45, 40.85, 13.33, and 13.84 percent respectively. FedEx has trailed its peers and sector by a wide margin.

Conclusion

FedEx is an established company that will continue to profit from the increased demand in the transportation space. The stock has just broken above a downtrend that may send it towards higher prices. However, earnings and revenue growth rates have not excited investors. Relative to its peers and sector, the stock is a relative underperformer. WAIT AND SEE what FedEx does in the coming quarter.

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