FedEx And UPS: Indicators of a Weak Economy?

 

Slow U.S. economic growth and an unprecedented increase in the cost of fuel have resulted in lower-than-expected U.S. package volume and an accelerating contraction in the use of premium air products. In addition, the anemic U.S. economy is negatively impacting package volume into the United States, affecting results for the International segment.

- UPS Press Release, June 23

Record high fuel prices and the weak U.S. economy dampened volume growth and substantially affected our bottom line.

- Fred Smith, Chairman and CEO Federal Express, June 18

Think about it: if business activity is humming, businesses are sending a lot of packages to each other and consumers are ordering a lot of stuff which has to be shipped to them.  For this reason, the transports have always been thought to be an important indicator of economic activity.

In the last week, both Federal Express (FDX) and UPS (UPS) have told us that the economy is very weak. 

Last Wednesday, FedEx said that U.S. package volumes for the quarter ended May 31, 2008 fell by 3.4% (FDX FY 4Q Earnings Release) - the most since the quarter ended Feb 28, 2002.

On Monday, after the close, UPS dramatically lowered its earnings guidance for the second quarter ending June 30 from $0.97 - $1.04 to $0.83 - $0.88 (UPS Press Release).

FedEx shares are down about 5%, and UPS is down 7% since FedEx’s earnings release.

Disclosure: Top Gun has no position in UPS or FedEx shares.

Comments

[Gross Bill]

Did you forget something? Like, maybe, to write an article? They should change the name of this site to "Seeking Filler."

[Oregonrain]

This is ridiculous. This is not an article. This should be pulled. I agree with Gross Bill...GONG!

[BioInvestor]

You're both very tough!!

There seems to be a lot of novice investors on this site; it's appropriate that articles be written for range of different sets of experience. So perhaps it's a novel idea idea to some reading this site that FedEX or UPS could be a leading indicator for economic activity.

[blink0404]

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the main idea is that individual investors dont have to act like institutional investors and this market and may be better holding cash than trying to beat the market.
www.greenfaucet.com/sh...