FedEx (FDX) is tumbling and you should care.
Though smaller in volume than UPS, FedEx ships over 13M packages per day, which means they have their finger right on the pulse of business and, this morning, they missed earnings by 2.5% – but that was after they drastically lowered guidance last quarter (sending the stock 32% lower) and now they are lowering guidance yet again, sending the stock down 7% pre-market.
Weakness in International Shipping is the major problem but FDX says the Government shut-down also contributed to giving them a very poor Q1 – though that's not the excuse for taking down Q2 as well. Nonetheless, we think this news was already baked in in December and, in fact, on Dec 14th, we sold FDX 2021 Jan $180 puts for $22.22 to net in for $157.78 in our Long-Term Portfolio and it's likely you can do better than that this morning – if you are brave enough.
Just because the economy is weak doesn't mean FDX is suddenly a bad company – so it's a great play for long-term investors on a $47Bn company ($45Bn this morning!) that dropped $4.5Bn to the bottom line last year but, even adjusting for one-time tax breaks – they should still be netting about $3Bn in profits in 2019 so $45Bn ($170) is very fair.
FDX is also still working through their $4.8Bn acquisition of TNT Express in Europe – and it was pretty bad timing as the economy began turning down last year as the Brexit fears grew.
Still, it's not FDX we're worried about but what it says about the broader market, which has mostly ignored the troubles in Europe and the damage that was caused by the Government Shutdown, as well as all the nonsense in Europe and, let's not forget, the continuing trade battle between the US and China. FDX is down $90 (33%) since Sept and about 40% as of this morning – it's the companies that haven't corrected yet that I'm worried about.