Wednesday, September 21, 2005

FDX good numbers?

Wall Street is going gaga over FDX's earnings. It was my bad not covering when a stock is selling down with upcoming earnings, it will typically do the opposite after the company reports (eg CSCO went up before reporting but reversed down 10% immediately after). Having said that and do away with the short term trading set-up, let's dig a little deeper into FDX's number.

I have 2 questions immediately having looked at the results:
1)How can a company as big as FDX turn on a dime? It's a titanic (yes I do imply it's sinking albeit noone sees it yet) that does not turn very fast. Only a quarter ago, they missed and now everything is hankytory? Let's pretend that biz do turn this quick, then what's to say that next quarter you could get lumpiness as things that drove this quarter suddenly goes away?
2)Oil is not the issue here: as I stated in my last post, oil is not the driver here as FDX uses surcharge to offset that.
3)Revs has been growing like weeds but how come margins are not improving? As I have pointed out, cyclical growth company such as FDX will continue to experience growth while their margins peak at the late stage of the cycle. That's the sign that things are deteriorating underneath (like the titanic)with the effects not seen until too late.
4)Besides, technically speaking, FDX is still trending in the downtrend even after today's spike.

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