Early Christmas for FedEx, Transports (FDX, IYT)

Transportation bell weather FedEx (NYSE:FDX) gets an early Christmas present of rising profits and new aircraft.

FedEx, widely viewed as a gauge of the global economy in light of its shipping activity, took off today with a 76% rise in quarterly profits year over year.  FedEx (NYSE:FDX) was rewarded with a 1.6% gain going into the close and took the Transportation Sector (NYSEARCA:IYT) along for the ride.

The company plans to upgrade its fleet with 27 new, more fuel efficient airplanes while saying it expected continued global growth but at a moderate pace.  December 12th was the company’s busiest day in history with volumes running two times daily average for the busy Christmas season and analysts infer that heavy shipping volumes will later translate into robust retail sales as people send gifts around the world to friends and family.  Earnings were $1.57/share compared to $0.89 this time last year.  Interestingly, one of the major drivers of the increased traffic was online shopping which could also translate into good news for major online retailers.

In Charles Dow’s day, transports were a key indicator and component of Dow Theory and major components were railroads.  Today, FedEx is widely viewed as a barometer for overall economic activity as the company moves a significant portion of U.S. commerce.

While FedEx (NYSE:FDX) registered healthy gains on the day, Transportation Sector ETFs went along for the ride with iShares Dow Jones U.S. Transportation Index (NYSEARCA:IYT) gaining 1.5% on the day.

Bottom line, FedEx is a bell weather for economic activity and supports the important transportation sector (NYSEARCA:IYT) and today’s reports are further indications of improving domestic economic conditions.

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