FDX also raised its earnings guidance, like UPS

FedEx Corporation (NYSE: FDX) is continuing the upward trend that was started last week by United Parcel Service, Inc. (NYSE: UPS) with strong guidance ahead.� Guidance was moved above consensus targets, and the old high-end is now expected to be the base guidance for FDX.� The shipping giant Fedex also raised its FY11 earnings guidance.

For Q1 earnings guidance, FedEx sees $1.05 to 1.25 EPS, well above the $1.01 Thomson Reuters consensus estimate and well above the prior target of $0.85 to $1.05 EPS.� For Fiscal-2011, FedEx c sees earnings at $4.60 to $5.20 EPS versus $4.40 to $5.00 previously offered and versus $4.98 EPS from Thomson Reuters.� When you consider the move in rival United Parcel Service, Inc. last week, there is more than just one way to trade options on the earnings guidance.

The raise is primarily due to better than expected growth in FedEx Express and FedEx Ground shipping volumes as package volume growth rates in the first quarter tracked a pace similar to its fourth quarter.� Another big bump came from strong and steady demand for the FedEx International Priority package and freight services, which are higher margin items and are expected to grow more than 20% this quarter.

After looking at the options matrix out there, speculators looking for further upside might want to look at the OCT-2010 $90 CALLS at $1.60.� This implies a 10% price move in the shares for the options to see intrinsic value, but even if shares rise 5% over the next six weeks the options could still climb to above $2.50.� With shares up over 4% at $82.25, the 52-week range for this issue is $63.46 to $97.75.� FedEx’s rival, United Parcel Service, Inc. is up over 1% at $64.57 and its 52-week range is $51.90 to $70.89.

Another issue at stake is the ongoing FedEx labor issue.� That could add a further bump to the scenario, although it could act against it as well if trends! resurfa ce on the side of labor.

For those seeking income or that would want to own shares at a discount to today’s $82.25 price, writing the AUG-2010 $80 PUTS would generate $1.50 in income per contract.� If the stock price falls back to where it was last week then you are effectively long the stock at $78.50.

United Parcel Service moved up 5% last week after it issued upside guidance after its earnings.

Some of the upward price moves may have already been seen here in these two key transport and shipping stocks, but there is still a much larger move that would be needed for FedEx before its 52-week high comes into play here.� A 52-week high is not anywhere enough of a reason alone to choose one over the other, but in today’s earnings environment there seems to be more comfort in speculating in companies that raise guidance versus those which are making excuses as to why they cannot meet their targets.

As of this writing, Jon Ogg did not own a position in any of the stocks named here.

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