FedEx Corp. (NYSE: FDX) is on the upswing after hiking its fiscal first-quarter earnings guidance. The parcel specialist said Friday morning that it expects first-quarter profits of 58 cents per share, up from its previous outlook of 30 cents to 45 cents per share. For the current quarter, FedEx predicts earnings of 65 cents to 95 cents per share.
Both figures compare favorably to analysts' consensus estimates, which call for a first-quarter profit of 44 cents per share and second-quarter earnings of 70 cents per share. Chief Financial Officer Alan Graf cited stronger-than-expected volume in FedEx's international priority-delivery service for the upbeat guidance, as well as strict internal cost management.
FedEx is slated to release its full first-quarter results next Thursday, Sept. 17.
In light of the news, FDX skipped to a gain of more than 6% right out of the gate. The gap higher leaves the equity hovering perilously above support at its 10-day and 10-week moving averages, which have helped guide the shares to a 13.3% gain year-to-date.
Pessimistic speculators were most likely caught off-guard by FedEx's rosy outlook. During the past 10 days, traders on the International Securities Exchange (ISE) bought to open 1.96 puts for every call on the stock. This ratio ranks higher than 76% of comparable readings taken during the past year, indicating that bearish bets have recently been more popular than usual.
The mood appears to be shifting, with call volume ramping up to 18 times the norm within the first hour of trading Friday. However, a closer look indicates that the call action might be linked to profit-taking, rather than the initiation of new bullish positions. Most of the volume on FDX's newly in-the-money September 75 call has traded at the bid price, revealing a bias toward selling activity, and implied volatility on the option is down 3.5% as a result.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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