Options Trade – FedEx Corporation (NYSE:FDX) Calls
Tuesday, June 17, 2014

**OPTIONS TRADE: Buy the FDX Oct 2014 145.000 call (FDX141018C00145000) at or under $4.00, good for the day. Place a protective stop limit at $1.60 and a pre-determined sell at $7.00.

by Ian Harvey

June 17, 2014

Introduction

FedEx Corporation (NYSE: FDX), the transport juggernaut, is scheduled to release its fiscal q4 '14 earnings before the opening bell on Wednesday, June 18, 2014.

Analyst consensus is expecting $2.36 in earnings per share (EPS) on $11.66 billion in revenue, for expected year-over-year growth of 11% and 2%, respectively.

Analyst consensus for revenues has fallen slightly from $11.714 bl to $11.66 in revenue since the March '14 q3 '14 earnings release, while the consensus EPS estimate has risen a penny in the last 3 months.

FDX is down about 2.5% year-to-date as of Friday, June 13th, but rose 56% in 2013, neither of which calculation includes the dividend. However, FDX has been trending higher over the last two months, and is currently approaching break-even on the year, down just 0.6% year-to-date.

FedEx (FDX) is scheduled to release its fiscal fourth-quarter report before the market opens on June 18. Headed into the company's quarterly report, the consensus estimate calls for earnings of $2.36 per share. FDX has been trending higher over the last two months, and is currently approaching break-even on the year, down just 0.6% year-to-date.

Technical Review

FedEx has retested December's all-time highs following 2013's 50% advance. 2013's move up was similar to the first move of 50 points out of the great recession. Those 2013 highs and more recently June's first half are now acting as a resistance area above $140. Historically, the stock has tested below the 200-Day MA soon after sharp advances, so a retest would seem likely by October. That being said, consolidative support appears strong below $136 down to $130 with limited resistance for higher prices. Above $135 encourages optimism.

Earnings

FedEx last issued its quarterly earnings data on Wednesday, March 19th. The company reported $1.23 earnings per share (EPS) for the quarter, missing the consensus estimate of $1.51 by $0.28. The company had revenue of $11.30 billion for the quarter, compared to the consensus estimate of $11.46 billion.

During the same quarter in the previous year, the company posted $1.23 earnings per share. The company’s revenue for the quarter was up 2.7% on a year-over-year basis. On average, analysts predict that FedEx will post $6.68 earnings per share for the current fiscal year.

Analysts Opinions

Equities research analysts at Bernstein increased their price objective on shares of FedEx from $136.00 to $139.00 in a research note issued to investors on Tuesday, 3rd June, 2014.

Also, the company has been the subject of a number of research reports:-

• Analysts at Barclays downgraded shares of FedEx from an “overweight” rating to an “equal weight” rating in a research note on Thursday, May 8th. They now have a $140.00 price target on the stock, down previously from $160.00.

• Separately, analysts at Zacks reiterated a “neutral” rating on shares of FedEx in a research note on Friday, April 25th. They now have a $143.00 price target on the stock.

• Finally, analysts at Argus cut their price target on shares of FedEx from $173.00 to $162.00 in a research note on Monday, March 31st. They now have a “buy” rating on the stock.

Conclusion

FedEx is supporting their stock with a massive buyback and insiders took advantage and sold the all-time highs. Now enters Warren Buffett's buying. Both UPS and FedEx have moved higher since the lousy UPS earnings report and are testing December highs.

Improvements in the overall economy should help FedEx post strong quarterly numbers, but one thing that could create a problem is higher oil prices.

FedEx has failed to hit its estimate each of the last two quarters, and four times out of the last eight. However, the company's fourth quarter has typically been a bright spot, and unless rising oil costs come into play, expect an upbeat quarterly report, which should keep the stock trending higher.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the FDX Oct 2014 145.000 call (FDX141018C00145000) at or under $4.00, good for the day. Place a protective stop limit at $1.60 and a pre-determined sell at $7.00.



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