FedEx Shares Rally Despite Weak Earnings

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Shares in US multinational delivery firm FedEx are trading over 2% higher pre-market on Tuesday as the company’s stock price continues to extend recent gains. Indeed, FedEx gains over the last two months have materialized despite a poor set of Q2 earnings. FedEx posted Q2 earnings per share of -$1.27. The figure wildly undershot Wall Street estimates of a $1.58 EPS.

Earnings Miss & Revenues Lower

In its Q2 earnings release, FedEx posted revenues of $17.32 billion. These slightly undershot expectations of a $17.58 billion result. Along with the figures, the company also updated its full-year outlook. It revised lower its forecasts as a result of the impact of the COVID-19 pandemic and the disruption suffered as a result.

Commenting on the results, FedEx chief financial officer Alan Graf Jr said:

″Our revised guidance reflects lower-than-expected revenue at each of our transportation segments and higher-than-expected expenses driven by continued mix shift to residential delivery services.”

Hiring To Be Reduced

Graf went on to explain that the company will be reducing hiring for its Express Air network as well as enacting reductions to the current workforce. The firm attributed the weak quarterly earnings result to a number of factors. Along with the disruption caused by the pandemic, FedEx also noted that it had suffered a loss of business from a “large customer”.

While FedEx didn’t offer any further clarity on this, the read is that it is referring to Amazon. The company saw huge growth in both customer numbers and sales over the quarter.

FedEx CFO Alan Graf Jr also noted that the prevailing reason for the loss of annual margin in the firm’s FedEx Ground business was as a result of the rollout of its six and seven-day delivery service as well as the loss of volume to Amazon.

Big Plans Announced

Despite a weak result in Q2, the company has been making positive steps with recent headlines detailing exciting new plans for FedEx. The delivery service announced this week that it has expanded its Ground operation to a full seven-day a week delivery service. This is after they secured a large investment to expand its operations.

As part of the new rollout, FedEx has expanded its Sunday delivery service to include 96% of the US population. This creates a significant “weekend competitive advantage”.

FedEx Shares Testing Bearish Trend Line

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Shares in FedEx have rallied firmly over recent months. Price has moved up from 2020 lows sub 100 to currently trade around the 226.12 region. Shares were recently capped at a test of the bearish trend line from 2019 highs. Price hit resistance at the 226.51 level, which remains the key upside level to break.

To the downside, any retracement lower will put focus on the 199.14 level support next. This is ahead of deeper support at the 178.14 level.

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