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company earnings

FedEx Stock Drop: Some Thoughts

The following is an amended version of the Sept. 16 Daily Contrarian. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

Things went from bad to worse after the close yesterday, with a profit warning from FedEx (FDX). The company blamed macroeconomic weakness in Asia and Europe. Perhaps more importantly, its CEO told CNBC he expects a worldwide recession to ensue imminently. FedEx stock dropped by 20% overnight and continued to fall after the open.

What FedEx is saying is disconcerting on a number of levels. But a little perspective is required. First, it’s worth keeping in mind that companies are quick to blame extraneous factors when things don’t go their way. Okay, FedEx is certainly in a good position to speak to economic realities and there may very well be a lot of truth to them.

FedEx plane. Source: Wiki

But let’s not forget that the consumer data in the U.S. is (so far at least) not exactly confirming these reports. Maybe FedEx is in a better position where these numbers are concerned. Or maybe they’re just losing market share (like, hello, Amazon?) and looking for a boogeyman? Let’s not forget that these warnings used to be a regular occurrence from FedEx.

None of this is to say that the overall economic prospects are rosy. You have the Federal Reserve hellbent on raising interest rates to ward off inflation, supply chain issues, war in Europe, etc. etc. Those variables should come into play before too long whether we want them to or not.

As for FedEx, the company may face more secular concerns with its business. The stock appears cheap after this sell-off. But profits and cashflows appear to be a concern and yeah, market share. Is anybody even looking at that?

Not investment advice. Do your own research. Make your own decisions.

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China Concerns Cloud Retail Earnings Week

The following is an amended form of the Aug. 15 Daily Contrarian. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

Some bad economic news out of China has weighed on risk sentiment overnight. The country’s central bank responded with a surprise rate cut. The impact is mostly limited to commodities so far, with WTI crude oil down 4% and copper off 2% in early Monday trading.

Starting tomorrow (Tuesday), the big box retailers will report earnings, with the likes of Walmart (WMT) and Home Depot (HD) up first. Wednesday we’ll get Lowe’s (LOW), Target (TGT), and TJX (TJX).

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Big Week Ahead: Earnings, GDP, Fed Interest Rate Decision

The following is an amended form of the July 25 Daily Contrarian. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack.

We are staring at a three-headed beast this week: Earnings, the Federal Reserve’s interest rate decision, and economic data.

Three-headed beast. Promo image for the original Showa iteration of King Ghidorah. Source: Toho Co via Wiki
Promo image for the original Showa iteration of King Ghidorah.
Source: Toho Co via Wiki

The Fed interest rate decision is Wednesday. Second-quarter GDP is Thursday. The most important economic data release isn’t until Friday with the Personal Consumption Expenditures, aka the Fed’s preferred inflation gauge.

The FOMC and Q2 GDP will get the lion’s share of attention. Both could turn out to be non-events. GDP is a trailing indicator and anyway this is just the first estimate of Q2 GDP. Yeah if it prints negative that will be two consecutive quarters, which technically means we were/are in recession, blah blah. Doesn’t change the fact that this tells us something which has already happened. As such it is unlikely to move markets very much.

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