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FedEx delivers revenue concerns, but shares rise

 

Friday, June 24, 2022

The news shaping the markets today

Russia launched a missile attack on Ukraine’s southern city of Mykolaiv. Despite the ongoing geopolitical concerns, the safe-haven US dollar traded slightly lower this morning.


Japan’s annual inflation rate came in unchanged at a seven-and-a-half year high of 2.5% in May. However, the latest reading was in-line with the consensus estimate, which lent support to the JPY/USD forex pair.


UK’s GfK consumer confidence indicator declined to -41 in June, from -40 in May, reaching a new record low for the second month in a row. Despite this, the GBP/USD pair rose in forex trading this morning.


Argentina’s GDP grew 6% year-over-year in the first quarter, after an 8.9% expansion in the prior period. However, the latest reading missed market expectations of a 6.1% rise and exerted some pressure on the ARS/USD forex pair.


Mexico’s central bank boosted its benchmark policy rate by 75 bps to 7.75%, sending the MXN/USD pair lower in forex trading this morning.

 

What’s happening: Shares of FedEx Corporation gained in after-hours trading on Thursday, despite the company reporting downbeat revenues for its fourth quarter.

What happened: Although the delivery giant missed sales expectations, it issued a strong earnings outlook for fiscal 2023.

The rise in FedEx’s stock in extended trading session on Thursday provided support to the shares of some of its biggest rivals.

How were the results: The Memphis, Tennessee-based company reported growth in both sales and earnings for the three months ending in May.

  • Revenues grew 8.1% year-on-year to $24.4 billion, missing market expectations of $24.56 billion.
  • Adjusted earnings surged 37.1% year-over-year to $6.87 per share, coming in-line with the consensus estimate of $6.87 per share.

Why it matters: Last week, FedEx added three new members to its board of directors under a cooperation agreement with activist investor D.E. Shaw Group. The company also raised its quarterly dividend by over 53%, to $1.15 per share.

Amazon’s strengthening its foothold in the delivery segment has impacted the businesses of both FedEx and UPS. Higher fuel surcharges, geopolitical uncertainty and volume softness also exerted pressure on the company’s FedEx Express division.

However, FedEx’s Ground unit margins expanded sequentially as higher costs were partially offset by growth in revenue per package. Ground margins widened to 10%, from 7.3% in the prior quarter, with revenue per package increasing 11%.

FedEx Freight recorded a sharp rise in both revenues and operating margins, with revenue per shipment surging 28% year-over-year for the business division.

The company had repurchased $2.2 billion in shares during fiscal 2022 and said it plans to buy back another $1.5 billion in the first half of fiscal 2023.

Management guided to adjusted earnings of $22.50-$24.50 per share for fiscal 2023, higher than Street expectations of $22.41 per share.

How shares responded: FedEx’s shares gained 2.5% to $233.90 in after-hours trading, following the release of quarterly results on Thursday. The stock has declined around 12% since year to date. Shares of Amazon and United Parcel Service rose 3.2% and 1.4%, respectively, in after-hours trading on Thursday.

What to watch: Investors will keep an eye on the shipping industry’s overall growth. Markets will also monitor the US GDP figure as well as Europe’s economic growth, which will impact the TNT business, which FedEx acquired in 2016.

The markets today

Gold will be in focus today after closing lower on Thursday

Context: Gold prices eased on Thursday, adding to losses in the precious three consecutive sessions.

Details: Gold prices rose early in Thursday’s session following the release of economic data from the US. The S&P flash manufacturing PMI tumbled to around a two-year low of 52.4 in June, from 57 in May, with the services index declining to a five-month low of 51.6 in the month, from 53.4 in May.

The strength in the US dollar also exerted pressure on gold, which is quoted in the currency in the global financial markets. The US the dollar index, which measures the greenback’s performance versus a basket of major rivals, gaining around 0.3% on Thursday.

Sentiment for gold was also impacted by Federal Reserve Chairman Jerome Powell saying during his testimony before the House Financial Services Committee on Thursday that the fight to bring down inflation was “unconditional.” Fed Governor Michelle Bowman also backed hiking rates by another 75 basis points at the central bank’s July meeting.

August gold fell $8.60, or 0.5%, to close at $1,829.80 per ounce on Thursday, settling at the weakest level in just over a week. The recent downturn followed losses for three consecutive sessions.

July silver shed 38 cents, or 1.8%, to settle at $21.042 per ounce. July copper fell 20 cents, or 5.2%, to $3.739 a pound, tumbling to its lowest in around 16 months. Platinum for July delivery declined by $22.50, or 2.4%, to $904.40 per ounce, while palladium prices for September delivery settled at $1,824.10 per ounce, down nearly 0.8%.

What to watch: Traders will keep an eye on rising inflation in the US and the Federal Reserve’s monetary policy. Developments around the Ukraine-Russia situation could also impact gold prices.

Other Markets: European trading indices closed lower on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 down by 0.97%, 1.76%, 0.56% and 0.82%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/CHF – 0.9612 and 0.9620 Positive
AUD/USD – 0.6902 and 0.6909 Positive
Silver – 20.977 and 21.050 Positive
Copper – 3.7614 and 3.7794 Positive
Nasdaq 100 – 11664.66 and 11733.98 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0535, 0.10%) Dow ($30,783, 0.36%) Brent ($105.85, -0.6%)
GBP/USD (1.2281, 0.16%) S&P500 ($3,818, 0.49%) WTI ($103.93, -0.3%)
USD/JPY (134.82, -0.10%) Nasdaq ($11,818, 0.68%) Gold ($1,827, -0.2%)

What else to watch today

UK’s retail sales, Spain’s gross domestic product, Turkey’s manufacturing confidence index and capacity utilization rate, Germany’s Ifo business climate indicator, Ifo current conditions index and Ifo expectations indicator, Italy’s consumer confidence and manufacturing confidence, China’s current account, Brazil’s FGV consumer confidence, foreign direct investment, current account and IPCA-15 consumer price index, Mexico’s economic activity, India’s foreign exchange reserves, Canada’s average weekly earnings of non-farm payroll employees, Argentina’s consumer confidence indicator, US new home sales, Michigan consumer sentiment and Baker Hughes crude oil rigs, as well as European Council meeting.


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