The Relationship Between TMO and FDX

Takeaway: FedEx's revised quarterly outlook spells trouble for TMO as global shipping volumes decrease.

FedEx (FDX) slashed its quarterly outlook yesterday, citing the global economic slowdown as a catalyst for slowing growth. That made us look at the relationship between FedEx shipping volume and Thermo Fisher Scientific’s (TMO) industrial focused Analytical Instruments business. With TMO shares up +27% year-to-date and up +16% alone in the last 3 months, the company is vulnerable to a move to the downside.

In the FedEx press release, FedEx only commented on their earnings guidance which they reduced to $1.37-$1.46 from their June guidance of $1.45-$1.60.  With the off-month reporting, we looked at both FedEx as a leading indicator for TMO (0.78 correlation) and peer UPS coincidently, (0.73 correlation). Take a look at the two charts below. Both the FDX and UPS charts show a decline in both business segments from Q212 onward.

The Relationship Between TMO and FDX - TMO FDX

The Relationship Between TMO and FDX - TMO UPS

If shipping volumes are the indicator of what’s to come, things are not bright for TMO going forward. We are currently short TMO in our Healthcare position monitor.