This delivery service beat earnings estimates by $0.17 last quarter, and the future looks good, considering one of its competitors—the U.S. Post Office—managed to lose $2 billion in the same quarter. The company just announced a new partnership with eBay to drop off unwanted items at local FedEx offices and receive assistance with posting them to eBay.
FedEx (FDX)
From Cabot Benjamin Graham Value Investor
FedEx (FDX), based in Memphis, Tennessee, provides transportation, e-commerce and business services to businesses and individuals. The company offers U.S. and international shipping services for delivery of packages and freight via ground or air transportation. FedEx Office, formerly Kinko’s, provides business services such as printing, copying, and sign and banner making to customers and for its own needs.
FedEx’s purchase of Dutch peer TNT Express, due to close in June, will benefit FedEx by providing a Pan-European road network that will greatly expand FedEx’s share in Europe’s growing cross-border e-commerce market. In addition, the deal will offer substantial cost savings to FedEx.
The company will retire 15 aircraft as it aims to modernize its fleet. FedEx’s will buy 50 additional 767-300F aircraft from Boeing to further the company’s efforts to upgrade its aircraft fleet and expand its capabilities in anticipation of higher growth.
Strong e-commerce sales in the U.S. continue to significantly bolster FedEx’s sales results. I expect sales to rise 6% and EPS to jump 16% to $11.80 during the 12 months ending May 31, 2017. At 16.2 times latest 12-month EPS, and with current cash flow exceeding 20.00 per share, FedEx offers investors a great opportunity to participate in the escalating e-commerce shipping segment.
The 0.62% dividend yield is low, but another hefty dividend increase is likely during the next few months. I am confident that FDX shares will advance 33% to my Min Sell Price of 217.35 within 12 to 18 months. Buy at 163.79 or below.
J. Royden Ward, Chief Analyst, Cabot Benjamin Graham Value Investor, www.cabot.net, 978-745-5532, May 5, 2016