FedEx Pre-earnings Analysis

FedEx Pre-earnings Analysis 

Chart done on daily timeframe. FedEx is set to report their first quarter earnings this week, which will be watched closely since they missed their last quarter estimates. Fierce delivery competition from Amazon and weakened demand may still be a theme for them this quarter, and if it impacts their guidance for the year then it can hurt their stock in the short term. Despite the shift in demand and competition, FedEx revenue has still grown considerably in the past five years, and their valuation is at an attractive number. Trading at a price to earnings ratio of 15, FDX is a cheaper buy than UPS. The company is also equipped with a healthy balance sheet and positive free cash flow. 

Profit estimates this quarter are 3.55, lower than last quarter’s 3.99 performance. Considering this report will include the month of December, we expect FedEx to surpass expectations. Their valuation is attractive so their earnings may bring positive attention if they beat, boosting the stock higher over the next quarter. 

Option chain analysis:

Options for the week expiring on March 22nd currently reflect a 86% implied volatility reading, which translates to about a $16 move. 

Since FDX is an opportunity at a long term play at this valuation, it is one to consider for a shares entry as a multi-month position of a LEAP call play.