FedEx upgrades outlook; Continental and United Airlines in process of selecting senior officials


North and South American carriers' stocks surged higher on Monday (26-Jul-2010), following the release of improved US home sales data during trading, showing signs of an economic recovery that could lead to improved demand. The Dow (+1.0%) moved higher as a result, as did the AMEX Airline Index (+2.9%).

  • North and South American airline stocks surged higher following improved US home sales data, indicating a potential economic recovery and increased demand.
  • Airline stocks have been trading based on the overall economic outlook, with positive economic indicators leading to increased investor confidence.
  • Oil prices remained below USD80 per barrel, providing some relief for airlines.
  • FedEx upgraded its profit outlook for the first quarter of FY2011, reflecting better-than-expected growth in volumes and a moderate recovery in the global economy.
  • Continental and United Airlines experienced stock gains as they progressed in selecting senior officials for their merger.
  • US Airways also saw an increase in stock value, while Air Canada, LAN Airlines, and GOL had marginal or no change in their share prices.

Standard & Poor's equity analyst, Jim Corridore, told Reuters that airline stocks have been trading lately on the overall economic outlook, stating that if the economy is going to start improving, airline stocks will be "golden".

Oil prices for the day were flat, remaining below the USD80 mark at USD78.87.

FedEx upgrades outlook

FedEx (+5.6%) benefited from its profit upgrade for the three months ending 31-Aug-2010 (1QFY2011) from between USD0.85-1.05 per diluted share to between USD1.05-1.25 per diluted share. For FY2011, the company expects USD4.60-5.20 per diluted share, up from USD4.40-5.00, reflecting the current market outlook for fuel prices and a continued moderate recovery in the global economy. FedEx is scheduled to report its full 1QFY2011 financial highlights on 16-Sep-2010.

FedEx Executive Vice President and CFO, Alan Graf Jr, stated the upgraded outlook was the result of its revenue and earnings growth exceeding original expectations, "primarily due to better-than-anticipated growth in FedEx Express and FedEx Ground volumes".

See related CAPA Profile: Outlook, Forecasts, Guidance

Continental and United in process of selecting senior officials

Continental Airlines (+5.8%) and United Airlines (+5.6%) also rose strongly on the back of news last week that the airlines are in the process of selecting senior officials for the merged entity. United meanwhile announced plans to delay its operations control centre relocation to Chicago's Willis Tower until early 2012.

See related CAPA Profile: Mergers and Consolidation

Elsewhere, US Airways (+5.4%) also gained for the day, with a large number of call options changing hands in morning trading.

Air Canada was the only carrier not to rise for the day, remaining flat, as Canada's TSX (0.3%) rose marginally compared to the Dow. Latin American carriers, LAN Airlines (+0.2%) and GOL (+0.7%), meanwhile rose only marginally.

North & South America selected airlines daily share price movements (% change): 26-Jul-2010

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