A Quick Take On FedEx And Micron In The Macro Context

It's not great.

If you were wondering what Wall Street thinks of FedEx’s guidance cut, the answer is that they generally appear to hate it, and as noted on Tuesday evening, the news comes at the worst possible time.

As ever, we try not to get mired in discussions of single stocks unless there’s a discernible connection to the macro picture. Clearly, this is a case where both FedEx and Micron (which also delivered disappointing forecasts and an equally underwhelming capex budget after the bell on Tuesday) are effectively “confirming” fears of a global growth slowdown and the timing is awful.

On Tuesday, the latest edition of BofAML’s fund manager survey showed respondents are the most negative on the global economy since the immediate aftermath of Lehman and whether you look at the flattening curve in the U.S. or simply take a gander at recent data out of China, pessimists will have no problem finding confirmation bias for a gloomy outlook.

Read more

With Fund Managers Most Bearish On Global Economy Since Lehman – Some Quick Thoughts

When two bellwethers like FedEx and Micron both disappoint, it sends the wrong signal at the wrong time. The Micron news is especially pernicious as it appears to underscore concerns about a turn in the Semi cycle, effectively validating some of the jitters that conspired to make October such an abysmal month for the space.

“While we continue to see attractive opportunity in the long-term opportunity at FDX, the quarterly results and updates were disappointing relative to our expectations, and we do not believe management’s updated disclosure removed the overhang on the stock”, Goldman wrote late last night, adding that the bank’s Buy rating “increasingly hinges on attractive valuation in shares.”

If you’re wondering whether Goldman thinks the underperformance in the shares relative to the broader market means the selloff is overdone, the answer appears to be “no”. “Despite our view that market expectations have come down meaningfully as evidenced by FDX shares 18% selloff over the past month, vs. the S&P -7%, we still view results as a disappointment”, the bank says, in the same note.



Commentary from other desks sounds similarly downbeat. “[The] Purple promise doesn’t extend to investors”, Deutsche Bank writes, on the way to slashing estimates and targets.  UBS cut their target on the shares to $205 from $256, and as for Barclays, the bank had this to offer:

Confidence [is] lost in forward outlook. [We are] materially lowering FDX price target. We are reducing our FY19 and FY20 estimates by 8% and 14% respectively, reflecting lower guidance and materially lower profit contribution from TNT.

As noted on Tuesday evening, the shares were bludgeoned in late trading and they were similarly beset in the premarket.



Micron is even worse.

That’s pretty much all we have to offer on this story, but again, we would encourage folks to consider the two companies’ results the macro context, despite the fact that doing so is, well, is discouraging.



3 comments on “A Quick Take On FedEx And Micron In The Macro Context

  1. I don’t think you call it confirmation bias if you understand global supply chain intricacies. Trump has been playing with matches and few seem to have understood the surrounding flammability. China can do negative GDP delta, no problem.

  2. The global economy has been softening for a year. Why are people surprised combined with horrific trade policy? People viewed stock price momentum as confirmation rather than doing their work.

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