Is the Most Important Stock of Earnings Season a Buy Now?

Investors have come to expect big tech stocks to drive the market higher. But for a sign as to how the real economy is performing, there are other sectors to look at. Energy is one player, and gradually rising prices in the space suggest the economic recovery, while uneven, is continuing.

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  • Another area is in shipping and logistics. Many headline stories about supply chain issues overlook the fact that labor shortages in shipping has been a big driver of prices.

    One company to best play this trend is FedEx (FDX). The company reports earnings after the market close tomorrow, and the shipping giant’s numbers will give a clearer sign as to global commerce than any single piece of government economic data.

    Shares of the stock are down a full 20 percent since their peak in May, a sign of concern about the overall economy. But the drop in shares, combined with the company’s 30 percent revenue growth in the past year, has led to shares trading at 12 times forward earnings, and at 0.8 times price to sales.

    Action to take: The company’s earnings report will either lead to shares finally breaking their downtrend, or continuing it. If shares start to move higher from earnings, they’re a buy here for a rebound. Investors who buy shares can also lock in a 1.2 percent dividend here.

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  • For traders, if shares move higher after earnings, the January $280 calls look like a good trade to play the rebound. If shares move lower, the existing downtrend will likely continue, the January $220 puts, last going for about $6.00, could see further upside.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.