June 19, 2018 / 6:11 PM / in 4 months

FedEx shares hit by U.S.-China trade tensions ahead of earnings

NEW YORK, June 19 (Reuters) - FedEx Corp shares suffered their worst sell-off in two months ahead of the package delivery company’s quarterly results on Tuesday, as the latest U.S.-China trade tensions stoked fears that swept through the industrial sector.

FedEx shares fell 1.7 percent at mid-afternoon, making the stock the biggest drag on the Dow Jones Transport Average index , a gauge of economically sensitively stocks. The Dow transports were down 1.8 percent overall, declining more steeply than the 0.5 percent drop for the benchmark S&P 500 index.

Shares of FedEx rival, United Parcel Service Inc, were off 2 percent.

“They enable the trade between countries, so they are going to be hit more than domestically oriented companies,” Jairam Nathan, an analyst with Daiwa Capital Markets America, said of the package delivery stocks.

Amazon Inc’s rollout on Tuesday of package delivery lockers for apartment dwellers also may have weighed on FedEx and UPS shares, an analyst said.

In the latest salvo between the world’s two biggest economies on Tuesday, China accused the United States of “extreme pressure and blackmailing” and vowed to retaliate after U.S. President Donald Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods.

Investors were looking for further insight into the fallout from the trade tensions when FedEx reports its fiscal fourth-quarter results after the market closes on Tuesday. Industrial companies overall have been a focal point for trade tensions, and the sector was down 2 percent on Tuesday.

FedEx is expected to post earnings per share of $5.71, a 34 percent rise from a year earlier, on revenue of $17.3 billion, according to Thomson Reuters I/B/E/S.

The company also may indicate any caution about the impact of an escalating trade dispute when it gives its outlook for its upcoming fiscal year. Analysts on average expect its earnings per share to rise by about 16 percent in fiscal 2019.

“Strong pricing trends driven by demand for e-commerce and time sensitive delivery services should result in an upbeat (fiscal) outlook,” Cowen & Co analyst Helane Becker said in a research note ahead of the results.

In its last quarterly report in March, FedEx Chief Executive Frederick Smith said the company was “concerned about the prospect of increased protectionist tariffs as history has shown repeatedly that protectionism is counterproductive to economic growth.”

In a statement on Tuesday, a UPS spokesman said the company “stands ready to help our customers no matter their needs for crossing borders or addressing trade complexities.”

Trading in the options market suggested investors were bracing for more of a volatile stock reaction than in the past to FedEx results.

Options on FedEx implied a roughly 4.3 percent move for the shares in either direction by Friday, according to options analytics firm Trade Alert data. Over the last eight quarters, FedEx shares have, on average, moved 3.2 percent, the day after reporting results. (Additional reporting by Lisa Baertlein in Los Angeles and Saqib Iqbal Ahmed in New York; Editing by Richard Chang)

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