FedEx’s Performance Saves the CE 100 Index From Decline as Nike Disappoints
It was a flat week at the end of a flat month for Wall Street as well as the CE 100 Index. The week ending June 28 saw a slight gain in value with a 0.4% uptick led by gains in the “Move,” “Banking” and “Enablers” pillars. For the month of June the CE 100 Index was flat; year-to-date it’s up 2.9%, just a shade below the 3.7% bump in the Dow.
The gainers were led by FedEx (“Move” pillar, 18.1% jump for the week), Mitsubishi Financial Financial Group and MongoDB. Some dynamics behind each:
FedEx: The company’s fourth quarter earnings, released last week, drove its stock price up as it had solid financials combined with a Wall Street-friendly plan to recover from losing the United States Postal Service account to UPS. FedEx is in the middle of a cost-cutting DRIVE initiative, but analysts were more impressed with its positioning for what is the second half of the year, by the calendar. According to Nasdaq.com, FedEx’s Revenue rose 1% year over year to $22.1 billion, primarily due to slightly higher yields for both Express and Ground segments. The average daily volume was down 1% for Express but up 1% for the Ground segment. FedEx also saw its adjusted operating margin expand by 40 bps to 8.5% in Q4.
Mitsubishi Financial Group (MUFG): The 11.8% jump for MUFG had a decidedly bipolar June with expansion plans countered by a compliance order. The combination worked. On the expansion side the company signed an agreement on June 26 for $195 million invested in Ascend Money, a Thailand-based FinTech company that offers advanced payments and financial services to 30 million active users across seven Southeast Asian countries. This investment supports MUFG’s strategy to expand its commercial banking business in the Asia-Pacific (APAC) region, its second home market. According to Zacks Equity Research, “within this region, there is a growing trend for digital financial service providers to utilize the latest technological advancements. These advancements then offer financial services to unbanked or underbanked consumers and SMEs.”
On the regulatory side of the ledger, Japan’s Financial Services Agency issued an order against MUFG for breaching regulations governing client confidentiality. Zacks said it will “reinforce internal control systems, including management systems, legal compliance systems related to banking-securities collaboration and customer information management systems.”
MongoDB: Interesting that data-developer platform MongoDB has been portrayed as one of the good guys that could have been helpful in the Synapse Financial bankruptcy. It could be part of the reason it pushed up 9.8% last week, as it didn’t release any dramatic news or earnings last week. It did get a glowing review from investment management company ClearBridge Investments: “The company offers a leading modern database platform that handles all data types and is geared toward modern internet applications, which constitute the bulk of new workloads. Database is one of the largest and fastest-growing software segments, and we believe it is early innings in the company’s ability to penetrate this market. MongoDB is actively expanding its potential market by adding ancillary capabilities like vector search for AI applications, streaming and real-time data analytics. The company reached non-GAAP profitability in 2022, and we see significant room for improved margins as revenue scales.”
On the downside, the CE 100 Index was hurt by poor performances from Nike, Xerox and DraftKings, with Nike causing the most disruption with a 22.4% drop. Nike shares on Friday June 28 tumbled nearly 20% after the company said it expected sales to decline in its new fiscal year, the latest sign of what OregonLive.com called “severe turbulence” at Oregon’s biggest company. CEO John Donohoe attributed the bad news to underperforming product franchises, but the company has been coming under fire lately for pulling back from its retail partnerships, opting for a D2C model. That strategy, say analysts, opened the door for brands like Hoka to take shelf space that Nike is trying to claw back.
Analysts were blunt in their assessment of Nike’s future. “Management credibility is severely challenged and potential for C-level regime change adds further uncertainty,” wrote Stifel Managing Director Jim Duffy in a note to investors.
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