Before Wednesday’s bell, delivery company FedEx (FDX) reported better-than expected results for its fiscal fourth quarter and upped its guidance, leading FDX stock to rally more than 6% on the day in a technically sound move that looks to have higher to go.
Specifically, FedEx came in with earnings per share of $2.46, which was 10 cents better than analyst expectations and up 7.5% on a year-over-year basis. Revenue came in at $11.8 billion and also beat consensus estimates of $11.64 billion.
From my perspective, one of the juicier bits out of the report was in the operating margins, which now stand at about 10%, and up about 40 basis points from the same quarter one year ago.
FDX continues to see good growth as shipments of packages and express delivery improves. This also is an interesting structural dynamic as online retailing continues to grow in this digital world, thus creating natural demand for package delivery companies like FedEx and United Parcel Service (UPS).
In terms of guidance, FedEx now sees fiscal-year 2015 earnings coming in a range of $8.50 to $9 per share, which compares favorably versus a consensus estimate of $8.76.
If one goes by the Dow Theory, then as long as the transportation stocks continue to show relative strength (as they currently are), then the bull market is still intact (which it is). Of course, things can change quickly, but monitoring the transports as a group is a good and simple way to gauge the strength of the broader stock market.
FDX Stock Charts
The end result of Wednesday’s movement was fresh all-time highs for FDX stock.
Looking at the bigger picture via the weekly multiyear chart below, after breaking past its long-term resistance line in October 2013, FedEx shares settled into a constructive consolidation phase in December. Wednesday’s rally took the stock out of this consolidation phase to the upside, which by definition should be bullish for FDX — at the least, for a few weeks.
Wednesday’s breakout is better visible on the daily chart below, particularly the massive spike in volume that it came on. Note that FDX stock already made a good move in late May when it broke past diagonal resistance (black line). This breakout line was then retested Tuesday, which also served as a retest of FedEx’s 50-day simple moving average (yellow).
Wednesday’s rally began right out of the gates, as FDX stock gapped higher and never looked back.
While this breakout move could see some consolidation in coming days, FDX stock now favors upside toward the $155 area in coming weeks. Active traders and investors can either enter the stock after a little consolidation or upon a break past Wednesday’s highs.
FDX stock should not fall lower than the $142-$143 area; if so, its breakout should be labeled a fake-out move.
Like what you see? Sign up for our daily Beat the Bell e-letter and get investment advice delivered to your inbox every morning!
Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.