FedEx Corporation ($FDX) will benefit from global growth

Investment idea by DTI

Exchange: NYSE
SectorServices
IndustryAir Delivery & Freight Services

Contents:

Entry strategy

Price: 255.1 (market price)
Stop-loss:  245.86
Take profit: first target 283, then 312
Investment horizon: up to 9 months

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Company details

FedEx is an international logistics company, specializing in delivery and freight services. FedEx is a pioneer in the one-day delivery and shipments tracking.

The company was founded in 1971 in Arkansas. FedEx market cap is $68 billion, while its workforce surpasses 400 thousand. $FDX stock is included in S&P 500 index.

Financial summary of FedEx performance is presented in Table 1:

FedEx financial performance
Table 1. Financial overview of FedEx Corporation ($FDX). Source: MarketWatch
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Technical analysis (trading plan)

FedEx trading plan
Pic. 2. Trading strategy for FedEx Corporation ($FDX). Source: TradingView
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Fundamental analysis

The company published its Q4 results on June 19th. EPS grew by 41% year-on-year, surpassing analyst consensus of 35%. All three departments (Express, Ground и Freight) met their targets.

FedEx confidently beats competitors by sales growth and profitability margins (see table 2 and table 3). It is worth noticing, that its leadership is both strong and stable, as the 5-year data suggests.

FedEx sales growth
Table 2. FedEx Corporation ($FDX) sales growth. Source: Reuters
FedEx profitability ratios
Table 3. FedEx ($FDX) profitability ratios. Source: Reuters

Such results might be explained by the bigger efficiency FedEx achieves in its investments — see its return on investment and return on assets ratios in table 4.

FedEx RoA RoI
Table 4. FedEx Corporation ($FDX) RoI and RoA. Source: Reuters

Despite strong fundamentals, $FDX trades at a discount to the market (see table 5).

FedEx valuation ratios
Table 5. FedEx Corporation ($FDX) valuation ratios. Source: Reuters

FedEx benefits from the increased economic activity and intense global trade, so the current economic recovery is expected to increase the company's sales. Moreover, FedEx is in the middle of integrating TNT Express, a European rival it bought in 2015. When the integration is over, FedEx will have expanded presence across European markets.

As the company's results depend on the macro trend, a possibility of large scale trade war and the slowdown of global trade remains the biggest risk for its stock.


Also published on Medium.