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FedEx and Other Logistics Stocks Worth a Look Now

by
May 20, 2013 11:57 am
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In the wake of upbeat presentations last week at Oppenheimer’s 8th Annual Industrial Growth Summit in New York City, the firm has become more optimistic about the stocks of logistic services providers.

In particular, the Oppenheimer analysts favor FedEx (NYSE: FDX), Landstar System (NASDAQ: LSTR) and XPO Logistics (NYSE: XPO). Below is a quick look at how these three stocks have fared and what analysts expect from them.

Note that Oppenheimer also recommended rental services stocks Essex Rental (NASDAQ: ESSX), Mobile Mini (NASDAQ: MINI) and United Rentals (NYSE: URI).

FedEx

This global delivery services giant sports a market capitalization of more than $31 billion and it is headquartered in Memphis. The dividend yield is about 0.6 percent. The long-term earnings per share (EPS) growth forecast is almost 13 percent, though the return on equity is only about 11 percent. The price-to-earnings (P/E) ratio is higher than the industry average, but so is the operating margin.

The short interest in FedEx was more than one percent of the float as of the April 30 settlement date. That was about the same number of shares sold short in the previous period, the lowest number in at least a year. Days to cover remained at less than two.

Of the 32 analysts that follow the stock and were polled by Thomson/First Call, 11 rate the stock at Strong Buy, and 10 others also recommend buying shares. The mean price target, or where the analysts expect the share price to go, indicates that there is more than 12 percent potential upside. Shares have not traded at that level since 2007.

The share price jumped more than 10 percent earlier this month, but that was not enough to recover from a sell-off in March. Over the past six months, the stock has underperformed rival United Parcel Service (NYSE: UPS) and the broader markets.

See also: J.P. Morgan Lowers PT on FedEx on Lower Fuel Prices

Landstar System

This freight transportation services provider has a market cap near $2.5 billion and a dividend yield of about 0.4 percent. Its long-term EPS growth forecast is about 16 percent, and the return on equity is more than 35 percent. But Landstar System is expected to post marginal EPS and revenue declines for the current quarter.

The short interest in this Jacksonville, Florida-based company was more than two percent of the float at the end of April, after the number of shares sold short fell more than 12 percent from the previous period. Short interest has been lower in only two periods so far this year. The days to cover is less than three.

The consensus recommendation of the analysts surveyed is to hold Landstar System shares, and it has been for at least three months. But the analysts think shares have a little head room, as their mean price target is about five percent higher than the current share price. That target is less than the 52-week high, though.

The share price is more than four percent higher than at the beginning of the year, but more than six percent lower than the 52-week high back in January. Over the past six months, the stock has underperformed competitors such as J.B. Hunt Transport (NASDAQ: JBHT) and Swift Transportation (NYSE: SWFT), as well as the broader markets.

XPO Logistics

This transportation and logistics services company is headquartered in Greenwich, Connecticut. It has a market cap of more than $320 million but offers no dividend. The long-term EPS growth forecast is more than 30 percent, but the return on equity is in negative territory. Strong revenue growth but net losses are forecast for the current quarter and the full year.

The number of XPO Logistics shares sold short as of the most recent settlement date represented more than 20 percent of the total float. That was highest level of short interest in the past year. And the days to cover rose to about 24 in the most recent period, also the highest level in at least a year.

However, seven of the 13 polled analysts rate the stock at Strong Buy, and three more also recommend buying shares. None of them recommends selling. Their mean price target suggests that the analysts on average see more than 16 percent upside potential. And that target would be a new multiyear high.

Shares have traded mostly between $16 and $18 since November, though the share price currently is above the 200-day and 50-day moving averages. The stock has outperformed much larger FedEx over the past six months, but it has underperformed the broader markets in that time.


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