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FedEx (FDX) Raises Forecast, Shares Rally


It looks like Federal Express (FDX) is living up to its billing. Less than a month ago, Barron’s predicted good things for the company, and today FedEx proved the point.

The company raised earnings expectations for its 2010 second quarter from $0.65-$0.95 to a substantially higher $1.10 per diluted share. The consensus estimate among analysts was $0.85/share. Today’s bump still comes in at almost half a buck lower than the same period a year ago, but it’s a nice surprise.

Shares are up nearly $2/share to $89.47 as the market opens, and will likely climb from there. Topping the 52-week high of $90.50 is easily within reach. A rising dollar could dampen overall enthusiasm somewhat as that typically causes share prices to pull back. Even FedEx might feel the effects of the dollar’s rise.

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The company attributed the boost in expected earnings to increasing volume in both its international business and in its U.S. ground shipping, together with improvements in cost controls. FedEx shares are up about 20% in the past 12 months, while United Parcel Service (UPS), which has had more trouble controlling costs, is about flat for the same period.

FedEx did not go into a lot of detail concerning its improved forecast, but investors look to the company as kind of bellwether for economic growth. If shippers are moving more goods, then there are more buyers out there.

But in the U.S. and Britain, manufacturing remains stalled, and it could be that a good deal of shipping is the result of clearing out inventories. If that’s the case, the fragile economic recovery we’ve seen over the past couple of months is in danger of collapsing again.

Like virtually every other company, FedEx is not immune to dollar swings. Today’s stronger dollar is weighing on both crude and gold prices. Bellwether or not, FedEx will feel the same weight.

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