FedEx (FDX)

It's underperformed UPS, but shares have recovered a lot this year due to new management. Merging fleet and air operations helped by lowering costs. They have problems with overseas margins. Prefers Cargojet.

They report Thursday. Is in a big turnaround, cutting costs and growing revenues. The CEO is pulling it off.

They reported a strong quarter last night and shares jumped 15% today, but what really caught the street's eye was the large share buyback they announced. It shows confidence.

He sold FedEx to buy more Apollo. FedEx talked about longer-term costs cuts last quarter, which lifted shares, but cost-cutting is now in the stock. Topline revenue declines are expected next week when they report. The stock hasn't done anything this year.

Typically cyclical, but two trucking companies have recently gone bankrupt. Reshoring will increase trucking, whether less-than-load or full load. Maryland bridge accident stopped a lot of ship traffic, so that should increase demand for rail and trucking at least temporarily. 

International business, which is growing faster than domestic. Likes management. Huge share buybacks. Guided to $17 EPS this year, he thinks can jump easily into $20s by next year. Best operator in the space worldwide. Not a huge valuation. Decent yield of 1.9%.

They're cutting costs, not growing the business organically. Last quarter was really bad, so all they've done today is recover that loss. Give the new CEO some time to straighten out the cost base and then we'll see if things pick up. The stock isn't cheap; shorts are discounting the market but that's where it should be for this cyclical stock.

Cost efficiency can only go so far. They aren't Meta which has Instagram and other levers of growth to pull. Yes, they've cut costs and introduced share buybacks, but after this you need to see organic growth.

Good company. Down from peak, bit of a bounce. Probably will keep pace with market, don't expect outperformance. Going to be part of the e-commerce economy. 

Was down an ugly 12% today after an earnings miss. Over-reaction? Earnings slightly missed. Adjusted operating income grew, though still came in a tad light. Saw 25.5% earnings growth YOY, but EPS still missed the street's estimate. The company cut their full-year forecast. The problems are rooted into their Express business, their largest, which saw revenues -6% YOY and operating income -49% YOY. FedEx ground is solid, and Freight continues to recover. In the US, some businesses moved from Express to the cheaper Ground service. Make sense. Also, there's less international air freight as competing rates have flatlined. Because oil prices are down this year, their fuel surcharges (and revenues) are lower. Also, they saw less business from the US Post Office than expected. Also, Wall St. priced in savings of the long-term Drive transformation plan too early. Yes, these problems are real, but are not enough to give up on FedEx. He believes the CEO who says that many of its problems are transitory (i.e. the post office deal ends next year and the shift to Ground sounds like a holiday season thing). Earnings took a hit, yes, but didn't evaporate as they would have a year ago. In fact, numbers are resilient and show how successful they've been in cutting costs. Costs are much better than in ages. Amazon: their parcel volume now surpasses FedEx and UPS, something that neither the CEO nor analysts mentioned. If Amazon keeps taking market share, then this will be a major problem for FedEx. Again, he feels FedEx's problems are temporary, and it trades under 14x PE. It could be in the penalty box for a quarter, but FedEx will get cheaper and shares fall lower.

Shares are up 10% in the past month. They report today. See what they say about their business in China, which accounts for a serious part of their business. He likes FedEx ahead of its quarter.

It reports Tuesday. The new CEO has re-energized the company by cutting costs dramatically while revenues rise. He expects them to release a terrific quarter, but if there's any pullback, then buy. They're in a long-term refresh after showing choppy returns for a while. He likes this long-term and the e-commerce tailwind.

FDX is expected to grow the top-line in the mid-single digit range but EPS is expected to grow closer to the range of 20% over the next two years. The company would be sensitive to any economic slowdown that occurs but so far the US economy has remained resilient. At 12X forward earnings we think FDX looks fine. The last quarter was a solid beat on earnings (beating estimates by 22%) and the stock has done well this year. It produces strong cash flow ($9.6B annually) with decent conversion to free cash flow ($3.5B).
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Run by a dynamite CEO. A definite buy.

They report Wednesday. He worries that even the best quarter won't send shares higher, and even decline, given high expectations. He expects a great quarter with beats. They took market share from UPS after fears of a UPS strike, but this seems like a one-time occurrence.

Are enjoying a good 2023 as they cut costs, but they are recapturing the losses of 2022. UPS is better for managing their balance sheet.