IS THE GLOBAL ECONOMY REBOUNDING?

FedEx raised their guidance this morning citing stronger demand and cost cuts.  Specifically, they said international demand was stronger than expected:

FedEx expects earnings to be $0.65 to $0.95 per diluted share in the second quarter, which reflects the current outlook for fuel prices and a continued modest recovery in the global economy. A substantial decline is expected from $1.58 per diluted share a year ago, as the company significantly benefited from rapidly declining fuel prices and the timing lag that exists between when fuel prices change and when indexed fuel surcharges automatically adjust.

“FedEx first quarter financial performance exceeded our guidance thanks to better-than-expected FedEx International Priority^® volume, strict cost management and solid execution of our strategy,” said Alan B. Graf, Jr., FedEx Corp. chief financial officer. “Despite some encouraging signs in the global economy, it is difficult to predict the timing and pace of any economic recovery. Revenue per shipment declined year over year in each of our transportation segments, as fuel surcharges declined significantly and we continue to face a very competitive pricing environment combined with significant overcapacity in the LTL freight market.”

It’s impossible to view this as anything other than an overwhelming positive for stocks.  Transports are very economically sensitive and any positive signs in volumes means demand is on the rise.  It is, however, important to note that FDX is expecting earnings to be off 53% versus last year.  Meanwhile, the stock is roughly flat compared to last year.  With earnings collapsing and the stock market acting as if the credit crisis never occurred you have to start wondering at what point the market is well ahead of itself with these massive declines in earnings and revenues?