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Michael Fowlkes' Analyst Insights

Options and ETF Analyst Writer
Michael Fowlkes
Author Bio

FedEx reports quarterly numbers June 20

Michael Fowlkes

6/17/2017 11:54 AM

What's Happening

Shipping giant FedEx (FDX) is expected to release its fiscal fourth-quarter results on June 20. The company will report after the market close, with the consensus calling for earnings of $3.90 per share. During the same period last year the company earned $3.30 per share, and the stock is up 11.8% on the year.

Technical Analysis

FDX was recently trading at $209.94, down $1.94 from its 12-month high and $64.94 above its 12-month low. Technical indicators for FDX are bullish with a strong upward trend. The stock has recent support above $186.00 and is trading above recent resistance. Of the 16 analysts who cover the stock, 11 rate it a “strong buy”, one rates it a “buy”, and four rate it a “hold”. The stock receives S&P Capital IQ's 5 STARS “Strong Buy” ranking.

Analyst's Thoughts

FedEx has been a top performer over the last year, and the future looks bright for the company. All retailers are placing additional focus on their online businesses, which should keep demand high for shipping companies moving forward. FedEx missed earnings estimates the last two quarters, but last quarter sales were better than expected, and Wall Street has so far been willing to overlook the recent earnings misses and driven the stock to record highs. Analysts expect strong year over year earnings growth, and looking ahead analyst expect that trend to continue. For the next five years, Wall Street expects annual earnings growth of 11.8%, which should be strong enough to keep shares building on recent gains. The stock has a P/E of 30, which is slightly high, but as long as the company is able to hit its estimates the stock will move higher.

Stock Only Trade

If you're looking to establish a long stock position in FDX, consider buying the stock under $210.00. Sell if it falls below $189.00 or take profits if it gets to $241.50.

Bullish Trade

If you want to set up a bullish hedged trade on FDX, consider an October 165/170 bull-put credit spread for a 30-cent credit. That's a potential 6.4% return (18.5% annualized*) and the stock would have to fall 18.9% to cause a problem.

Bearish Trade

If you want to take a bearish stance on the stock at this time, consider an October 250/260 bear-call credit spread for a $0.50 credit. That's a potential 5.3% return (15.3% annualized*) and the stock would have to rise 19.3% to cause a problem.

Covered Call Trade

If you like the stock, but wish to lower your cost basis, you may want to consider an October $200.00 covered call. Buy FDX shares (typically 100 shares, scale as appropriate), while selling the October $200.00 call for a debit of $192.40 per share. The trade has a target assigned return of 3.9%, and a target annualized return of 11.5% (for comparison purposes only).