FedEx On Notice Today
FedEx Corporation (FDX) is on a down spiral, down more than 20% in December and down more than 30% from January’s all-time high and trading near a 52 week low. Back in September, FedEx reported earnings that beat on revenue, but missed profit estimates. During the earnings call, FedEx decreased their 2019 numbers because of the ongoing US-China tariff war, which has already affected 10% of its businesses in China. On that news FedEx sold off hard.
Then in recent news, the President and CEO if FedEx Express, David Cunningham was fired, I mean is retiring effective Dec 31st. FedEx air-delivery accounts for over 50% of the company’s revenue.
The timing of the announcement –- during the peak season and about two weeks before the earnings report -- raised questions about the Express business and whether FedEx will scrap its goal of improving operating income at the division by $1.2 billion to $1.5 billion within two years.
“One can only think this is bad news. Otherwise, the company would have announced it during its earnings release,’’ Credit Suisse Group AG analyst Allison Landry said in a Dec. 12 note. “With no further information from the company, the logical conclusion by the market appears to be: Kiss the $1.2 billion-$1.5 billion target goodbye.’’
Lets not forget about Amazon Air.
Morgan Stanley analyst Ravi Shanker said in a report Tuesday that both delivery giants could lose 10% of their revenue to Amazon Air by 2025. Shanker cut his price targets on UPS (UPS) and FedEx (FDX) and both stocks plunged more than 6% as a result.
He notes that Amazon (AMZN), which currently is leasing 40 cargo jets, could eventually have 100 planes running and estimates that the planned Amazon Air routes could overlap with more than two-thirds of the volume flown by UPS and FedEx.
That's bad news for both companies since Shanker said that UPS and FedEx each generate nearly 20% of their overall revenue from US air deliveries.
Morgan Stanley believes Amazon Air represents 2 percent of potential revenue lost for UPS and FedEx this year. The firm sees that revenue loss accelerating to more than 10 percent by 2025.
FedEx will report earnings again on Tues. I’m expecting more negative news because I think the top has already been reached in the Transports.
I'm Calling The Top In The Transports
However, price is way oversold and didn’t sell off with the Markets yesterday…only down $1.92. So FedEx is overdue for a bounce, possibly with the chance filling the gap at $200.
However, with the economy inevitably slowing down and pressure by Amazon Air, the chart suggests a $150 target is in the future for FedEx.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
It's sad that FedEx have failed to deliver.
FedEx just tanked after announcing earnings.
I think I was too subtle: It's sad that
I apologise for my sense of humour - it has no "off" switch.
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