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Michael Fowlkes' Analyst Insights

InvestorsObserver
Options and ETF Analyst Writer
Michael Fowlkes
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FedEx reports Q4 earnings June 19

Michael Fowlkes

6/16/2018 11:53 AM

What's Happening

Shipping giant FedEx (FDX) is scheduled to report its fiscal fourth-quarter results after the market close June 19. Analysts forecast earnings of $5.71 for the quarter, up from $4.25 during the same period last year. FDX stock has appreciated a modest 2.5% on the year.

Technical Analysis

FDX was recently trading at $263.92, down $10.74 from its 12-month high and $60.79 above its 12-month low. Overall technical indicators for FDX are bullish and the stock is in an upward trend. The stock has recent support above $255, and recent resistance below $266. Of the 19 analysts who cover the stock, 16 rate it a “strong buy”, one rates it a “buy”, and two rate it a “hold”. FDX gets a score of 84 from InvestorsObserver’s Stock Score Report.

Analyst's Thoughts

FDX has put some impressive earnings beats each of the last two quarters, and the street expects another beat for the company’s most recent quarter, with a whisper number of $5.76 for the quarter, a nickel above the consensus. The strong economy has worked in FedEx’s favor, with earnings rising 18.8% per annum over the last five years, and analysts expect to see earnings continue to rise by an average 15.0% a year over the next five years. Consumer confidence is high, with low unemployment and rising wages, which should continue to keep demand high for FedEx as more and more shopping is done online. With the strong growth estimates, and a forward P/E of just 15.1, there appears to be a lot of value left in the stock. Analysts have a $287.13 price target on the stock.

Stock Only Trade

If you're looking to establish a long stock position in FDX, consider buying the stock under $264. Sell if it falls below $237 or take profits if it gets to $303.

Bullish Trade

If you want a bullish hedged trade on the stock, consider an August 230/240 bull-put credit spread for a $0.95 credit. That's a potential 10.5% return (60.8% annualized*) and the stock would have to fall 8.7% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider an August 290/300 bear-call credit spread for an $0.80 credit. That's a potential 8.7% return (50.4% annualized*) and the stock would have to rise 10.2% to cause a problem.

Covered Call Trade

If you like the stock but wish to lower your cost basis on a new position, you may want to consider an August $270 covered call. Buy FDX shares (typically 100 shares, scale as appropriate), while selling the August $270 call for a debit of $257.60 per share. The trade has a target assigned return of 4.8%, and a target annualized return of 28.3% (for comparison purposes only). 

 

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