What’s up?

FedEx will report fiscal third-quarter results on Tuesday, March 19, after the closing bell. The numbers will be critical for the stock’s medium-term fate. They will either let the price reverse up or will make it resume the downtrend which has been in place since the start of 2018.

Why is it important?

In general

According to the consensus forecast, earnings per share will account for $3.16, while the revenue will equal $17.7 billion. In December, when the company delivered its latest financial report, it lowered guidance for 2019. This pressured the stock and led investors to trim their expectations.  

Indeed, FedEx has plenty of challenges. The business suffers problems in Europe, plus there was also a turnover in the company’s management which made it more difficult to integrate the acquired TNT. Finally, Amazon.com starts developing its own delivery system.

On the upside, the company made an effort to reduce costs. Although the positive effect is to be seen only in the future, it was a step in the right direction. The stock is also very sensitive to the US-China trade negotiations. If the two countries reach an agreement, FedEx stock will get a boost.

For investors

The stock depreciated by 30% during the past year. It has been recovering since December in line with the overall market. However, the price still retraced only about a third of its spectacular decline, so the stock looks rather cheap. Its P/E ratio is around 16, which is lower than the industry’s average of 26. Most analysts share the opinion that the stock should cost closer to $200-$220. Even those analysts who have lowered their forecasts recently, target these levels.

For traders

One thing we can be sure of is that Tuesday’s release will provoke a spike in volatility. All in all, the EPS and revenue expectations are rather low, so a positive surprise can make the price spike up. The stock needs to push past resistance in the $187.00 area, and then the “double bottom” may drive it to $198.00 or even $208.00. Support is located at $168.50.

FedEx, weekly chart