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Wednesday, June 16, 2010

FDX Earnings Conference Call

-FDX continues to see strength in international load volumes, still seeing double digit growth in Europe, and things are not bad as some people portray them. They are forecasting 3.3% US & 3.1% global economic growth. FedEx projects earnings to be $0.85 to $1.05 per diluted share in the first quarter and $4.40 to $5.00 per diluted share for fiscal 2011. This guidance assumes the current market outlook for fuel prices and a continued moderate recovery in the global economy. Their below consensus EPS forecast for FY 2011 was due to anticipated higher employee costs.
-Based on FDX management's outlook, I believe that fears of global economic downturn is overblown and as these fears continue to subside, stocks that are leveraged to "the very large trend of emergence of middle classes in India, China, and Brazil" should continue to perform well.
-As for FDX, I do not expect the stock price to fall below the recent low of $76 based on management's bullish outlook. Assuming FDX stock price not to go below $76 and rise slowly for the next few months, I would buy the Oct. 80 calls, sell 2 Oct.90 calls and buy Oct 95 calls (1x2x1 spread). At current prices, this could be done for $3.32. Maximum loss on this position is $332 for 1 spread if FDX stock price remains below $80 with maximum gain $668 if FDX closes at $90 on Oct 15.

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