FedEx Earnings Have Been Disappointing. Where Charts Say Transportation Stocks Go Next

A FedEx truck in San Francisco. (David Paul Morris/Bloomberg)

Key Points

About This Summary

• FedEx has a history of disappointing earnings reports, with the stock price often reacting negatively.
• XPO shows promise, potentially breaking out at $135 with a target of $159 by year-end.
• Joby Aviation, after a summer surge, may offer a low-risk entry point around its current level.

FedEx has earned a reputation as a serial underperformer when it comes to earnings, with investors frequently disappointed by weak results. The last five times FedEx reported earnings, the market reacted negatively.

The question is if the company can finally break that pattern when it reports after today’s close. FedEx has been trading in a broad range between the round $200 and $300 levels since last November. A post-earnings disappointment could send it heading back toward the lower end of that range.

Part of its headwinds can be traced to Amazon, which continues to build its own freight and logistics network. I have also discussed United Parcel Service, now 42% off its 52-week high and trading back near pandemic-era lows, offering what could be a compelling risk/reward setup.

Turning to FedEx’s chart, the daily view over the past year tells a problematic tale. The stock broke below a bullish falling wedge pattern on July 30, a bearish take. As the saying goes, false moves often lead to fast moves in the opposite direction. Since July 30, the stock has moved sideways, likely looking for direction into year end and ahead of earnings.

FDX consolidating as it anticipates today’s earnings.

Elsewhere in the transportation sector things look less grim. XPO could be a name ready to blossom. The stock is flat year to date, but since bouncing off the round-number support at $90 in early April it has been producing a series of higher lows.

Technically, the stock successfully filled a gap on June 2 from the May 9 session, and is now approaching a key breakout level. Like many leading stocks, it appears to be offering an add-on entry as it coils within a symmetrical triangle, with a potential breakout trigger at $135.

A decisive move through that level could launch a measured move toward $159, a target that could happen by year-end.

XPO was trading at $132.81 Thursday.

XPO’s tight trading pattern suggests a strong move is imminent.

Another transport stock in the iShares U.S. Transportation ETF that soared this summer is Joby Aviation, which doubled in price between late June and early August. Over time, I’ve found it wise to let the initial euphoria cool off and indeed some of the buzz around the name has noticeably quieted in recent weeks.

The daily chart below highlights how round-number theory played a role in the run from $10 to $20, followed by a healthy pullback. Importantly, JOBY remains well above its prior cup-base breakout pivot of $10.82, which was taken out on July 8.

The stock now sits just below its 50-day simple moving average, but the appearance of doji candles on both Tuesday and Wednesday suggest selling pressure is abating and may be giving way to stability, possibly marking a low-risk entry point.

For those looking to build a position, consider an initial entry here with a plan to add on strength above the double bottom pivot at $15.61. A move through that level could see a move back toward $20 by year end.

Joby Aviation traded at $14.57 Thursday.

JOBY’s chart suggests selling pressure is abating

Write to Doug Busch at douglas.busch@barrons.com