What can FedEX and Nike tell investors about the state of the consumer

FedEx Corporation (NYSE:FDX) and Nike (NYSE:NKE) will both report earnings later in the week in reports that are being seen as economic bellwethers, particularly for consumer-facing companies. The two multinationals could also provide an inside view to investors of how they view potential tariff risk to their businesses, with the Trump Administration about five weeks away from taking over.

As one of the largest air delivery and freight services companies globally, FedEx’s (NYSE:FDX) performance has historically been closely watched by investors and analysts as an indicator of broad consumer trends. The reasoning behind FedEx’s (FDX) status as a bellwether is rather straightforward, as when the economy is doing well, more people are buying and selling goods, leading to increased package shipments. The earnings report this week is likely to include commentary relevant to the broad retail sector on how the holiday season is shaping up.

Analysts have lowered their expectations for FedEx (FDX) recently, with 20 of the last 21 EPS revisions being to the downwards side. Bernstein said it expects FDX will lower its full-year outlook when it reports. However, online retailers such as Amazon (AMZN), Wayfair (W), Etsy (ETSY), Chewy (CHWY), and have reacted in the past more closely to what FedEx (FDX) says, in particular about “priority shipping” as a proxy for how confident consumers may be.

As for Nike (NYSE:NKE), the biggest read-through for investors could be on China’s economic trends. Nike’s “Greater China” segment accounts for approximately 15% of the company’s total revenue, making it a significant market for the brand and a reasonable proxy for other U.S. retailers selling in the region. Nike’s (NKE) conference call could include updates on the expected impact of stimulus measures in China and if the company is considering making any major sourcing or manufacturing changes to stay clear of tariffs.

Another major pullout from Nike’s (NKE) report will be the update on promotional activity, which will be of high interest to other athletic apparel companies and retail chains after it issued a warning last quarter.

Over the last six weeks, shares of FedEx (FDX) are down 3.3%, while Nike (NKE) is up 4.4%.