Indexes opened higher Wednesday on growing optimism over a trade deal with China, but steadily drifted down during the session. The Dow Jones Industrial Average (DJINDICES: ^DJI) and the S&P 500 (SNPINDEX: ^GSPC) closed with small losses, but gainers outnumbered losers on the New York Stock Exchange. Energy and technology were the strongest sectors.
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Two companies reported declining profits last night but managed to beat expectations. Shares of both FedEx (NYSE: FDX) and Micron Technology (NASDAQ: MU) rose today.
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FedEx beats on the bottom line
FedEx reported fiscal fourth-quarter profits that beat expectations despite challenges faced by its FedEx Express segment, and shares rose 2.5%. Revenue grew 3% to $17.8 billion, about what analysts had expected, and adjusted earnings per share fell 15% to $5.01, beating Wall Street's estimate of $4.85.
FedEx Ground had strong volume growth driven by e-commerce, but margins were hurt by increased transportation costs and the launch of six-day-per-week operations, so operating income was flat year over year. FedEx Freight grew revenue and operating profit 5%, while operating profit from FedEx Express fell 12% on a 1% decline in revenue.
Looking forward, FedEx expects a mid-single-digit decline in adjusted earnings per share in fiscal 2020 compared with the $15.52 it earned this year, caused in part by weakness in global trade and industrial production. Analysts had been expecting a 4.5% increase.
Micron results: Not as bad as expected
Shares of Micron Technology soared 13.3% after the company reported steep declines in revenue and profit in the fiscal third quarter that were still better than observers expected. Revenue fell 39% to $4.79 billion and non-GAAP (adjusted) earnings per share plummeted 67% to $1.05. Analysts had predicted earnings of only $0.78 per share on revenue of $4.69 billion.
The average price of DRAM fell 20% in the quarter, while bit volumes were roughly flat, resulting in a sequential revenue decline of 19%. NAND prices were down 18% since last quarter and shipment quantities dropped by mid-single digits sequentially. Officials on the conference call said that shipments of both categories were affected by trade restrictions on Huawei, and total revenue would have been about $200 million higher without them.
Micron said that it's determined that some of its orders from Huawei don't fall under the ban, and it has resumed some shipments to the Chinese company. It also said that it's seeing early signs of demand recovery for DRAM, but given market uncertainties, the company is cutting capital expenditures from $10.5 billion to $9 billion.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jim Crumly owns shares of AMZN and Micron Technology. The Motley Fool owns shares of and recommends AMZN and FedEx. The Motley Fool has a disclosure policy.