This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

FedEx's Stock Has Limited Upside

NEW YORK (TheStreet) -- When shares of FedEx (FDX) reached a high of $118 more than a week ago, I reached for my wallet to check how much money I had. No, I wasn't thinking about buying the stock. I needed some proof the full-blown economic recovery, on which this stock is trading, was actually real.

If we can look beyond the shutting down of our government, there are indeed meaningful signs of fiscal progress here in the U.S. But that's not necessarily the case for other FedEx markets like Europe, Asia and Latin America. Given that the stock now trades at the pre-global-recession highs of 2006, it's time to approach with caution and ship some FedEx shares out of your portfolio.

Now, I won't deny that in the company's more recent earnings report FedEx did exactly what it had to do to deliver on both the top and bottom lines. But I'm not willing to overlook that although revenue advanced 2% year over year to $11 billion, this is still a company in transition and have instituted strict cost-cutting measures.

To that end, CEO Fred Smith, who has his finger on the pulse of the global economy, didn't seem too optimistic about what's around the corner, saying: "FedEx Express remains focused on reducing costs while facing challenging global economic conditions." Not surprisingly, even after the slight revenue and earnings beat, management wasn't confident enough to raise fiscal-year guidance, with growth expected to be in the range of 7% to 13%.

On some levels this could be seen as a positive, given that FedEx was forced to lower guidance earlier this year. But to the extent that the unchanged guidance supports a stock price that is trading as if all global economic worries are over, I don't believe it does.

Let's not forget, even though FedEx has always been a true leverage play on global economic growth, there is a reason why the company has begun to focus on cheaper shipping options. Management has realized, by virtue of sustained declines in the Express segment, that consumers in both developed and emerging markets are no longer pursuing FedEx's higher margin services.

Stock quotes in this article: FDX, UPS, ODFL, GWR 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs