Federal Express Reports 4th Straight Quarter Of Declining US Revenue
A lot of important earnings news affecting the market today: Oracle (ORCL), Nike (NKE), Bear Stearns (BSC), Federal Express (FDX) and Winnebago (WGO).
Everybody pretty much knew Bear was going to report an ugly quarter and they in fact did. Not only did they announce a $1.9 billion mortgage securities related writedown but investment banking revenues were down 44% compared to last year. In fact, none of their businesses were really strong with prime brokerage flat and asset management up 10% (BSC 4Q FY Earnings Release).
Bear, the smallest of the big 5 investment banks by market cap, seems to also be the most vulnerable to the current situation since its business is predominantly focused on the debt markets including mortgages.
Even though shares are already down almost 50% year-to-date, I still don’t see anything to like about Bear going forward except for the possibility that somebody will buy them.
The original school of technical analysis was invented by Charles Dow, also the inventor of the Dow Jones Industrial Average. The first average he created was actually the Dow Jones Transportation Average (it was the era of railroads). And one of Dow’s big ideas, called Dow Theory, is that the transports should confirm the industrials.
In other words, if industrial stocks are going down, transports should be going down too if the industrials are accurately reflecting reality. That’s because the transports’ business depends on transporting industrial goods. If less industrial goods are being sold, hurting industrials revenues and earnings, less should also be transported effecting transports earnings and revenues.
Federal Express (FDX) reported this morning and it was their fourth straight quarter of declining US revenues (FDX US Revenue Chart – the chart is derived by multiplying US average daily volume growth by average US revenue per package growth). Once again CEO Fred Smith mentioned “weak US economic growth” as a drag on Fed Ex.
As you can see from the chart, the last time Fed Ex reported consecutive negative US revenue growth was over the 6 quarter period from March 2001 through August 2002 – pretty much coextensive with the last US recession.
Fed Ex’s shares themselves have also been notably weak, down about 20% over the last 5 months (FDX YTD Chart).