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Once upon a time, in the great 80's action series The A-Team, a fellow by the name of "Hannibal" Smith coined the phrase: "I love it when a plan comes together." And I wonder, is it a coincidence that the CEO of FedEx (NYSE: FDX ) is named Fred Smith?
Judging from recent news, "the plan" is certainly coming together just fine for FedEx. Yesterday, I pointed to analyst projections of single-digit profits growth for FedEx over the next five years, and called them ridiculous. After all, FedEx just mirrored UPS's (NYSE: UPS ) 5% rate hike with a 5% price increase of its own. When combined with a modest uptick in package volume as the U.S. economy pulls back from the brink, it seemed to me that FedEx cannot help but match, and more likely beat the pants off of, Wall Street's projected 7% growth rate.
Actually, scratch that "match" point. Within hours of my laying out the bull thesis in favor of FedEx, management pre-released its second-quarter earnings report. The company's $1.10 in per-share earnings -- while an absolute decline of about 30% in comparison to last year's Q2 -- nonetheless trounced both Wall Street estimates and FedEx's own range of $0.65-$0.95.
FedEx credited "growth in our U.S. overnight express and FedEx International Priority services ... aided by inventory restocking and our successful sales efforts" for its earnings beat.
The latter point suggests good things for customers like Best Buy (NYSE: BBY ) , Lowe's (NYSE: LOW ) and Borders (NYSE: BGP ) . As for the former point -- well, as I argued yesterday, it shows that Goldman Sachs knew what it was talking about last month. By all accounts, Black Friday and Cyber Monday both went great guns for online retailers, as sales grew in the double-digits both days. Amazon.com (Nasdaq: AMZN ) appears to have done good business last weekend, and according to Coremetrics, sports apparel hawkers like Under Armour (NYSE: UA ) saw a significant traffic increase, although sales per customer were down slightly.
Just the beginning
"Good." "Better." That still leaves open the slot for "best" investment from the revival of online retail, and I have to wonder, folks, whether FedEx might claim this prize. Clearly, sales are not as weak as some pundits have feared.
How fast is it flowing, and will FedEx put the lie to that now-infamously conservative projection of "7% growth?" I've got my suspicions ... but tune in when FedEx reports its "official" Q2 numbers on the 17th, and we'll tell you the answer for sure.