Sometimes, nights define the days. Last night's trifecta of good news from Adobe (ADBE) , FedEx (FDX) and KB Home (KBH) would normally define this session. But we've got to deal with oil inventories at 10:30 a.m., on top of a big and surprising drawdown according to the API numbers last night, 7.5 million barrels instead of an expected build, as well as the Fed, of course.
However, these three companies are an astounding read on the economy and it is one that can, without a doubt, handle any sort of rate increases that the Fed wants to give us, quarter, or even a half point this year alone.
I say that because Federal Express increased an amazing 12% year over year -- or, as CFO Alan Graf put it, it "knocked the ball out of the park" with this quarter. Clearly, the only thing that is constraining FedEx is a lack of capacity; pretty funny, considering that just a few months ago Bloomberg wrote a trenchant story entitled "Will Amazon Kill FedEx."
If anything, the amount of e-commerce business just knows no end to growth, with this time around a whole new class of goods increasing, large items, including televisions, mattresses and trampolines being called out. As Graf pointed out, "originally we did get a little surprised by the huge quantities of these non-conveyable and oversized things."
That extension is great news for Growth Seeker portfolio name Amazon (AMZN) , not so great news for brick and mortar stores. Given that FedEx has now picked up share for 17 consecutive years despite putting through price increases pretty consistently, I didn't feel all that concerned about the route system Amazon's developing.
How big is the runway? And I am only speaking domestic, which is going to be a much smaller part of the business as the TNT acquisition is integrated. I thought this piece of data was most salient: there are 156 million unique addressed in the U.S., growing by 900,000 a year and the company "really only delivers to a small percentage of them."
Much more room to grow.
KB Home had an exceptional quarter, driven by fabulous growth in California that helped spur a 14% increase in revenues on top of a 23% increase last year. Some may focus on the fact that the company delivered on the low end of revenue guidance. I focus on the fact that the company said that the boom is powered by a "continued upswing in demand, driven by rising household formation, favorable demographics, jobs and income growth and the easing of mortgage restrictions" that is allowing an "increase in activity for more affordable sub markets."
That's great news and back to the trends in creation of divisions during the earlier and healthier part of the economic expansion of the 2000s.
Adobe? What can I say, this company does more digitization of pretty much any in the country, considering the 23 trillion data transactions that the company managed. Overall revenue growth of 20% including 39% year-over-year creative cloud growth tells you how fast digitization is taking over every aspect of creativity and marketing in this country.
Can any of these trends be stopped by rate hikes? No, as they are secular in nature, whether it be the growth of e-commerce from FedEx, the increase in housing formation for KB or the increased use of Adobe products to process and sell anything online. These are trends that will continue long after the Fed has met and discussed its course, even as the algos and the machines say sell.
Transportation of goods, creation of housing and the marketing and documenting of digital data: three trends on the upswing that we learned about last night, three healthy growth categories that the gloomsters could care less about, when they should be caring about little else as we venture into the next Fed meeting.
