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Blast of Cold Air for FedEx and IPOs

Thursday, 16 Dec 2010 | 9:58 AM ET

FedEx's disappointing earnings report dropped futures about 4 points pre-open; initial jobless claimsand Housing Starts for November(slightly stronger than expected) had little impact pre-open.

FDX down 2 percent pre-open, reported Q2 earnings of $1.16, below consensus of $1.31, due partly to "strong compensation and benefits headwinds;" revenues also on the light side. The express-shipping segment did well, with revenues up 13 percent. 2011 guidance was raised to $5.00-$5.30 vs. $4.80-$5.25 previously.

Elsewhere:

1) IPOs end the year with a whimper. Swift Transportation did gets its IPO priced, but below the range. The largest truckload carrier in North America priced 73.3 million shares priced at $11, below the price talk of $13-$15, but at least they got it done. Yesterday 3 of 4 IPOs priced below expectations. The IPO market is likely closed now until 2011.

2) General Mills falls 1 percent after its Q2 earnings missed estimates ($0.76 vs. $0.78 consensus). While volumes rose 3 percent, sales grew just 0.8 percent (less than expected) as higher promotional activity reduced selling prices. Despite the "challenging" first half, the foodmaker remains optimistic for an improving second half and reaffirms full-year guidance of $2.46-$2.48 vs. $2.48 consensus.

3) Pier 1 Imports rises 1 percent after Q3 earnings topped estimates ($0.18 vs. $0.14 consensus). The home good retailer reported improving margins and stronger-than-expected sales. Comps rose 10 percent, boosted by solid sales of holiday goods.

4) Rite Aid falls 2 percent despite reporting a smaller-than-expected Q3 loss (loss of $0.09 vs. loss of $0.13 consensus). Comps fell 1.3 percent as a slow flu season negatively affected sales.

Weighing on shares is a downbeat outlook. Sales for the fourth quarter "will be softer than we had expected" and the drugstore also cuts its full-year earnings guidance to loss of $0.60-loss of $0.74 vs. loss of $0.57 consensus.

5) AutoZone announced it will repurchase an additional $500 million in stock, which has been trading at historic high levels. The buyback plan accounts for approximately 4.3 percent of its current market cap.

Birinyi Associates notes a slight buying opportunity today in the stock. Since 1999, the auto retailer has announced buyback programs 22 other times, with the stock trading up the day after the announcement 62 percent of the time, and posting an average gain of 0.63%

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