After FedEx reported disappointing results on Wednesday, bulls continued to look at the long-term prospects for the shipping giant.
But shares of FedEx (FDX) are down nearly 3% Thursday, or $2.34, to $96.79.
Deutsche Bank Analyst Justin Yagerman raised his price target on FedEx from $125 to $127. He has a Buy rating on the stock despite disappointing fourth quarter earnings per share guidance. He lowered fiscal year estimates, with fiscal 2013 projections at $6.08 from $6.46 per share, and fiscal 2013 lowered to $8.04 from $8.40. He left is fiscal 2015 estimate unchanged at $9.38. Yagerman writes writes:
“we are buying yesterday’s weakness (down 6.9%) as we see strong fiscal year 2014-15 earnings growth.”
Sterne Agee Analyst Jeff Kaufman on Thursday lowered his earnings estimates on FedEx. He now expects earnings of $6.14 per share for 2013, from $6.52, and for 2014, he lowered his estimate to $7.93 from $8.20.
Kaufman calls FedEx ”an 18-month story” and says yesterday’s disappointment is par for the course for a company undergoing a reorganization. That the Fedex international network requires further adjustment is
“Outside of some hot money disappointment that the volume growth in China didn’t match up with profit growth because of mix changes, the company’s realization that the international network required further adjusting is within the overall realignment of assets that FedEx will be making over the next 15-18 months. It doesn’t change the longer-term profit outlook, nor our conviction that these changes were long overdue.”
“The reality was express division margins were right in line with our models – so NOT A SURPRISE to us, and indicative of the need for the changes FedEx is making. The miss versus our models was the freight division. … Freight missed our view on fewer shipping days & weather costs – a mis-model on our part. Operating margin did expand, but only by 40 bps – we expected greater expansion. Ground looked great – growth should help offset expenses from the realignment of Express.”
Barrons.com said Wednesday that the stock is positioned well for the long term, given its duopoly with United Parcel Service (UPS). See Barron’s Take: “FedEx – Boxed In For Now.” Subscription required.)
China’s Cnooc is a step closer to a big play in the North American energy patch with a green light, declared by the Canadian government Friday evening, on its $15 billion bid for Canadian oil-and-gas explorer Nexen.
Nexen (NXY) shares surged more than 14% after hours, having closed down 6.6% Friday. Shareholders have approved the acquisition, but Nexen still needs U.S. and British government approval to complete the deal since it has properties in both places, according to Dow Jones Newswires’ Paul Vieira, who added:
“Friday’s decision was Cnooc’s biggest-and most closely watched-hurdle. Canada has long welcomed big foreign investment to help it develop its energy and mining resources.”
The deal is “likely to be of net benefit to Canada,” according to Canada’s Industry Minister Christian Paradis, as quoted by MarketWatch here.
Canada’s currency should be a beneficiary, given the financing demands of such a large acquisition; this deal is the fifth-largest foreign acquisition of a Canadian company ever according to Dealogic, and this Dow Jones Newswires report.
Cnooc (CEO) is one of the largest independent oil and gas exploration and production companies in the world. There’s more on the company on its English-language website. Nexen is a big player in Canada’s oil sands, but it also has shale and conventional exploration assets.
Asian governments and companies are eager to secure future energy reserves as their populations boom. The Canadian government also announced that it approved the purchase of Progress Energy Resources by Malaysia’s state-owned oil-and-gas company. The Petronas (Petroliam Nasional Bhd) offer over the summer represented a 77% premium to Progress’ then-price; the $5.2 billion deal will mean natural gas exports to Asia. More on that from Bloomberg here.
Caterpillar (CAT) is up 4.2% this afternoon even as the broader market is basically trading flat. The company appears to be rising on news that China will ramp up its infrastructure spending with a plan to spend $157 billion on 60 new projects. The National Development and Reform Commission announced the approvals today ahead of data due out Sunday that could show that the Chinese economy continues to decelerate.
Caterpillar reported a 11% drop in purchases of mining equipment in the Asia Pacific region in the second quarter, primarily because of the Chinese slowdown. The company said at the time it had reduced production in China, allowing dealers to reduce their unsold equipment inventory.
Chinese premier Wen Jiabao said today that the country should still meet its growth targets, despite a recent deceleration in the country’s GDP growth. He also said that inflation has been slowing, which opens the door to more monetary stimulus. The news appears to be outweighing data that showed foreign direct investment in China fell to a two-year low in July, at least as it relates to U.S.-traded stocks.
Miners were also on the upswing, as lower interest rates in China could spur demand for some commodities. and Cliffs Natural Resources (CLF) was up 2%. BHP Billiton (BHP) rose 1.2% but said today that it may be forced to cut jobs because of the slowdown in China.
Stocks snapped their two-day winning streak with sizable losses Friday.
The Dow Jones Industrial Average lost 1.1% while the S&P 500 fell 1.3% and the Nasdaq was down 1.5%. It was the worst week of the year for the indexes, and after last week’s tumble marks the first time in 2012 that they have seen consecutive weekly losses.
China was a major concern, as GDP growth missed analysts’ estimates. The news was enough for investors to shrug off earnings beats from both JPMorgan (JPM) and Wells Fargo (WFC). Energy stocks also suffered as oil futures fell.
Investors expressed concern again over China, as a report from the nation’s National Bureau of Statistics showed GDP growth of 8.1% in the first quarter, below the 8.3% analysts were expecting.
JPMorgan said its first-quarter profit fell to $5.38 billion, or $1.31 a share, from $1.28 a share in the same period a year ago. Revenue rose 6% to $26.7 billion. Analysts were expecting the bank to earn $1.16 a share on revenue of $24.4 billion.
Wells Fargo said it earned $4.25 billion in the first quarter, or 75 cents a share, up from a year-earlier profit of 67 cents, and ahead of the consensus of 73 cents. Revenue grew 6.4% to $21.64 billion, the company’s highest revenue in nine quarters and better than the $20.51 billion analysts were expecting.
JPMorgan was recently up 0.9%, while Wells Fargo was off 0.1%.
Stocks futures were broadly lower before the open today, with the Dow, S&P 500 and the Nasdaq all falling. A survey of Chinese factories reached a four-month low, putting pressure again on commodities as well as European and Asian stocks.
However, the domestic labor picture looked brighter, as unemployment claims fell to their lowest level since February 2008. According to the Labor Department, initial claims slipped by 5,000 to a seasonally adjusted 348,000, while prior week claims were revised upward by 2,000, to 353,000.
Stocks ended lower across the board Tuesday, snapping stocks’ three-day winning streak, as investor jitters over Chinese demand weighed on equities.
Many stock watchers were expecting a pullback after stocks’ impressive recent gains–yesterday the S&P reached levels it hasn’t seen in nearly four years.
Shares of commercial information firm Dun & Bradstreet (DNB) were stumbling this morning as it announced it was temporarily suspending operations in China to investigate whether it had violated privacy laws in its data collecting.
Dun & Bradstreet initiated the probe after a report on Thursday by state-controlled China Central Television that alleged the company improperly collected information on 150 million people. The firm is investigating whether its practices violated local consumer-privacy laws, as well as whether employees in China violated the U.S. Foreign Corrupt Practices Act.
In the interim, Dun & Bradstreet said it was temporarily shuttering its Shanghai Roadway D&B Marketing Services Co.; it acquired the business, which last year accounted for about $23 million in revenue and $2 million in operating income, in 2009.
The report on Dun & Bradstreet’s practices, aired in observance of World Consumer Rights Day, is another embarrassment for Western companies doing business in China: Both McDonald’s (MCD) and Carrefour have apologized after China Central Television alleged that the firms were selling products past their sell-by dates and mislabeling chicken at some locations, respectively.
American depositary shares of the Chinese solar-power products maker JinkoSolar (JKS) are trading up 15% to $34.69 after third-quarter results that blew past analyst expectations.
Revenue more than tripled and margins shot up to 34% from 16%, helped an increase in shipments. The company, which went public in May, raised its revenue forecast and projected profits of $210 million to $220 million for the fourth quarter. That compares with forecasts of $162 million from analysts polled by Thomson Reuters.
Chinese makers of solar panels have been able to undercut their U.S. and European competitors in price, while the industry as a whole has benefited from greater government requirements and incentives.
Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.
Sam Mamudi has been a business and financial reporter for 12 years, and has written for the world’s leading publications, including The Wall Street Journal, Financial Times and Institutional Investor News.
Email Sam at email@example.com