Posted by Milos Sugovic
Good strategies are based on good indicators. With the news of FedEx quarterly profit down 22 percent, I can’t help but recall a note from Gene Colter in November of last year regarding a FedEx cut in profit forecasts:
The first shoe was housing, and here comes another: FedEx just cut its earnings outlook. (There may well be more than two legs on the Economy Animal; a third leg would be that poorly understood appendage, the consumer.)
FedEx and other major shippers are viewed as proxies for the broader economy, because, even though we live in the Internet Age, they still touch all parts of the cycle: If manufacturers are making fewer goods, reduced freight at FedEx reflects that. If fuel costs are climbing and thus raising shipping costs, FedEx reflects that. Etc.
FedEx is seen as a bellwether of U.S. economic activity. So it’s no surprise that high oil prices, lower consumer confidence, decreasing industrial production, and inflationary pressures are reflected in FedEx’s earnings. Heck, with service in more than 220 countries and territories, FedEx’s pain or gain is a proxy for global economic activity.
So if businesses want to make strategic short and long term decisions, they need not wait for macroeconomic indicators that are generated by government agencies such as the BEA or BLS. Those statistics should be taken with a grain of salt anyway; and they take forever.
To stay ahead of the game, look at players with cross-sector linkages and the trends they’re facing. Surely, FedEx will deliver your strategy fastest.
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