Wednesday morning showed signs that investors might finally be starting to feel a little more optimistic about the prospects for the stock market. Futures contracts were up as much as 1% on major stock market benchmarks, bouncing back from some fairly steep declines that investors have had to endure recently.
Market participants came into this week focusing specifically on a couple of key companies that were poised to offer their latest financial results. Indeed, positive results from delivery giant FedEx (FDX -2.09%) and athletic footwear stalwart Nike (NKE 0.66%) showed clear signs of financial health not just within the respective companies themselves, but across the broader consumer and business economy. Below, you'll find details on how FedEx and Nike fared and why investors are pleased.
FedEx makes do despite slowing volume
FedEx shares rose about 6% in premarket trading on Wednesday morning as investors reacted to Tuesday afternoon's release of its fiscal second-quarter financial results for the period ending Nov. 30. The air and ground delivery specialist faced tough economic conditions that weighed on shipping volumes and key financial metrics, but the hit wasn't as bad as many investors had feared, and most of those watching the stock seemed comfortable with FedEx's outlook for the coming year.
Continued weakness in demand hurt FedEx's business performance. Revenue of $22.81 billion was down about 3% year over year. Operating income fell by a steeper 26% from year-ago levels, and adjusted earnings of $3.18 per share were down significantly from the same period in fiscal 2022.
The FedEx Express business was the worst performer among the delivery company's segments, with operating income plunging 64% due to lower global volumes. Cost reduction actions helped to mitigate the impact of falling volume, but those efforts will take time to fully play out. More positively, operating income for the ground and freight segments were up 24% and 32% respectively, with higher pricing helping to offset elevated costs.
FedEx indicated that it couldn't offer firm guidance incorporating required mark-to-market accounting rules on retirement plans. However, excluding those adjustments and other one-time costs, the company gave earnings guidance of $13 to $14 per share for the full fiscal year. With strong evidence of its pricing power even under tough economic conditions, FedEx shareholders saw the company doing the best it could while remaining in a solid position longer-term.
A slam-dunk for Nike
Meanwhile, Nike got an even bigger gain, jumping 12% in premarket trading. The latest financial numbers from the athletic footwear and apparel specialist showed strong evidence that it is working through some past challenges and aiming its sights toward future growth.
Nike's fiscal second-quarter results for the period ending Nov. 30 showed the company's emphasis on getting inventory out the door. Revenue of $13.3 billion was up 17% year over year, even including a headwind of 10 percentage points due to the strong U.S. dollar. Nike Direct sales rose 16% on a 25% rise in digital revenue, and wholesale revenue climbed 19% from year-ago levels as well. Gross margin deteriorated significantly, falling 3 percentage points to 42.9%. However, even with the corresponding hit to the bottom line, earnings of $0.85 per share were still up 2% from where they were in the same period last year.
As it warned last quarter, Nike took efforts to liquidate inventory through higher markdowns, especially in North America. Elevated freight and logistics costs also had a downward impact on the shoe stock's income, although strategic moves to boost pricing in select areas helped to offset some of the cost pressures.
Yet Nike shareholders appeared to focus on the big revenue gains from the company, which showed that consumers are still willing to spend money, especially when they're getting good deals. That could bode well for a host of retailer and consumer products companies this holiday season, and investors see Nike taking full advantage as the holiday season progresses.
