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FedEx, Texas Instruments Make Unappetizing Snacks


Companies deliver more bad news.

Hello from New York, where no matter how retail sales turn out, this is already the angriest, most confusing Christmas season in memory.

Consider yesterday's news. Texas Instruments (TXN) took its fourth-quarter estimates to $0.10 to $0.16 versus a prior estimate of $0.30 to $0.36.

On the upside, the spread remains $0.06. On the downside, the new upper end of the range isn't enough to make a phone call and $0.06 now amounts to a range of 60%. Meanwhile, FedEx (FDX) cut its full-year range to $3.50, with the old low end of $4.75 becoming FedEx's new high-end goal.

As mentioned on Fast Money, FedEx didn't take $4.75 off the table. So there is that. On the downside, FedEx expanded its "spread of possibilities" from a 10.5% range to 35%. Believing anything is possible is a nice way to see the world, if you're an individual; if you're a corporate entity, a spread of more than 35% from your low to high end is roughly akin to saying "Hey, dude, we're pretty much going 100mph with the lights off. All bets are off, man."
For those of you who are fans of using things such as "forward P/E" to pick stocks: When FedEx made last night's announcement, they were trading at 15 times next year's low-end guidance. Not "cheap" - but not expensive for a quality company.

Two things happened when FedEx's news hit the wires: One, FedEx was suddenly trading at 21 times the low end of full-year guidance. For a stable business in this market, 21 times is a bit steep. For a company unable to get its estimates for next year any tighter than a 35% range, 21 times next year's guess is absurdly pricey. Second, FedEx was making a slightly more subtle admission that it has utterly no idea what's going on with its business. Your guess is as good as FedEx's. If you've done homework, your guess is probably actually much better than what FedEx is forecasting.

Texas Instruments always misses. It's just a "not good" company. To be disappointed by TXN is to be Linus waiting endlessly for the Great Pumpkin. FedEx is, or was, reasonably respectable. Comparing the 2 is comparing apples and, if not oranges, at least pears.

The tricky part of economic downturns is no one knows where they end. FedEx will actually be lucky to make $3.50 next year. With oil off $100 and a shipping company taking down numbers by 28%, FedEx is utterly tied to that utterly amorphous creature that is "the global economy."

Judging by what companies in TXN's related businesses are saying, TXN will have to be insanely lucky to hit that $0.06 number.

What's it all mean? This: You can trade this market based on whatever you want -- stars, goat entrails, lunar patterns -- they're all good to me.

But "fundamentals"? You make that argument in my house, and you've defined yourself as either a salesperson or a lunatic. Honestly, it doesn't matter which; either way, I'm not interested.
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No positions in stocks mentioned.

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