Barron’s Says FedEx (FDX) Is A Smart Buy In A Recovering Economy
November 17, 2009 1:14 PM
FedEx (NYSE: FDX) is all set to gain the maximum from the next wave of upturn in the economic cycle. Any improvement in the economic activity will benefit FedEx, which had evolved into a multifaceted transportation specialist with a dominant global presence and having expanded into areas like logistics support.
According to Barron's, ositives in FedEx’s favor include a growing footprint in big overseas markets like China, enough operating leverage to boost earnings when volumes ramp up, and solid growth at its very profitable FedEx Ground unit. The industry is all set to become a global duopoly with FedEx and UPS (NYSE: UPS) likely to dominate.
FedEx expects Dec. 14 to be its busiest day in 2009, with around 8% increased volume than the same day last year. Rob Pickels, a senior analyst at asset manager Manning & Napier, which owns FedEx shares, estimates that the company, which had a profit of $3.67 a share for its most recent fiscal year, can earn $7 to $9 in a more normal economy.
Traditionally, FedEx has proved to be a good investment option with a total annual return of 5.7% over the past 10 years. However, there are still certain dark clouds on the horizon like a massive capital expenditure, a still ailing economy and falling operating margins. A legal dispute with the Teamsters Union is also a cause of concern.
