FedEx (NYSE: FDX)
Quality Value Investing Research Report | $FDX Updated Coverage | April 2024
Summary:
FedEx Corporation is a dividend-paying large-cap stock in the industrials sector’s air freight and logistics industry.
In a review of the stock price’s present value, FedEx shares are arguably trading at a discount to fair value.
However, analyzing the company’s current wealth results in a neutral investment thesis regarding enterprise quality.
QVI maintains its coverage rating of FedEx in the Expanded Real-Time Picks as a result of this updated research report.
When referencing this research report, access your Quality Value Investing (QVI) Glossary of Investing Terms and Metric Targets and Research Report Format Guide. Unless noted, all data presented is sourced from Seeking Alpha Premium as of the market close on April 23, 2024, and intended for illustration only.
In this updated coverage QVI Research Report, we’ll reexamine the Expanded Real-Time Stock Picks industrials sector holding, FedEx Corporation, to see if it continues to meet Quality Value Investing’s investment criteria based on our checklist analysis of the business’s current wealth and its stock’s present value.
FedEx: Company Current Wealth
Value Proposition
FedEx Corporation FDX 0.00%↑ is a dividend-paying large-cap stock in the industrials sector’s air freight and logistics industry. It was added to the QVI Real-Time Stock Picks on February 2, 2022, at a cost basis of $240.38 a share, adjusted for splits and dividends.
FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. It operates through FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services segments.
The FedEx Express segment offers express transportation, small-package ground delivery, freight transportation services, and time-critical transportation services.
The FedEx Ground segment provides small-package ground delivery services.
The FedEx Freight segment offers less-than-truckload freight transportation services.
The FedEx Services segment provides sales, marketing, information technology, communications, customer service, technical support, billing and collection, and back-office support services.
In addition, the company offers supply chain management solutions, air and ocean cargo transportation, specialty transportation, customs brokerage, and trade management tools and data.
The company was founded in 1971 and is headquartered in Memphis, Tennessee, USA.
Economic Moat
Morningstar assigns FedEx a narrow moat rating based on the competitive advantages and scale of its Express and Ground segments.
QVI’s Value Proposition Elevator Pitch for FedEx:
FedEx remains a formidable operator in the air freight and logistics industry despite the challenges in recent years that facilitated the stepping down of founder and long-time hands-on CEO Fred Smith to become executive chairman.
Due Diligence Resources
For a more in-depth analysis of the all-important value proposition, visit FedEx’s investor relations webpage and its most recent Form 10-K Annual Report submitted to the US Securities and Exchange Commission or SEC.
QVI’s value proposition rating for Fedex Corp.: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
Per the chart below, FedEx’s trailing three-year annualized revenue growth was high-single-digits and outperformed the industrials sector’s +5.75% median growth. Notably, the company’s topline growth tempered to a negative -5.51% for the most recently reported twelve months.
Farther down the income statement, FedEx’s three-year, mid-single-digit net profit margin aligned with the sector’s median net margin of +5.91%.
Returns on Equity and Invested Capital
FedEx’s senior management produced a three-year double-digit return on equity, or ROE, just above QVI’s targeted threshold and the sector’s median ROE of +12.31%.
Stock buyback programs often elevate ROE. For example, FedEx initiated a new $5 billion share repurchase program in March after reporting that its cost-cutting measures had helped boost profits. Are they buying back shares at value prices on behalf of shareholders?
FedEx’s three-year return on invested capital, or ROIC, was below QVI’s threshold but in line with the sector’s median ROIC of +7.01%. However, FedEx’s ROIC barely exceeded its weighted average cost of capital, or WACC, of 8.21%, demonstrating that its senior executives are average capital allocators of late. (Source of WACC: GuruFocus)
QVI’s business fundamentals rating for FedEx Corp.: Neutral.
Next, we’ll look at the company’s returns on management chart, enterprise downsize risks, the stock price’s present value, share price downside risks, and the investment thesis, each exclusive to Quality Value Investing’s premium (paying) subscribers.
Disclosure: At the time of this writing, I/we had no beneficial positions of FDX in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in their own research or due diligence and consider (as appropriate) consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.