Take A Flyer On FDX

Federal Express (FDX) is a legendary company but its stock is currently hated. I’m not going to pretend to know the reasons why. What I do know is that it’s a great company, trading at a trough multiple in an environment that will reward value stocks.

Let’s start with their FY3Q22 which they reported after the close Thursday. In their largest segment, Express, average daily package volume was -11% year over year. However it’s important to realize that the comparable quarter (Dec 2020-Feb 2021) was when COVID was raging. That’s a tough comp; comps will get easier going forward. Composite package yield (i.e. pricing) was +19%. In their second largest segment, Ground, average daily package volume was flat while pricing was +9%. These are not the numbers of a business that’s falling apart.

Turning to valuation, FDX is guiding adjusted earnings in the fiscal year that ends in May to $20.50-$21.50. The stock closed the after hours at $219 so we’re talking about a 10x multiple on current earnings. You won’t find many cheaper stocks.

I have some concerns about package delivery in a recessionary environment as well as fuel costs. But I think these are priced in at current levels.

Yesterday on CNBC’s Fast Money, I saw a pitch for IBM [SUBSCRIPTION REQUIRED] as a great value stock for the current environment. I was intrigued but after looking into it I like Campbell Soup (CPB) and FedEx (FDX) better.