This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
TheStreet Open House

FedEx's Stock Has Limited Upside

Stocks in this article: FDX UPS ODFL GWR

That revenue in the Express segment, which is FedEx's largest business, fell by 0.3% serves as a perfect example. As has been the case over the past couple of quarters, management continues to improve efficiency within the Express segment, which can be seen in better profitability, including a 50-basis-point improvement in operating margins this quarter.

Oddly, even when there is good news, it comes with some concerns. Take, for instance, the company's strong Ground business, which posted a solid 11% year-over-year revenue increase. While the operating income for that business grew by 5%, operating margins still fell by 100 basis points. Essentially, there was some inefficiency even in FedEx's best performing business.

I've said this once and it bears repeating here; the Street is not assessing FedEx's total performance relative to its restructuring plans. I appreciate that as iconic as FedEx is, the company deserves the benefit of the doubt. It's nonetheless a risky bet to have bid up this stock close to 30% over the past five months solely based on some marginal improvements, especially since management have not spoken favorably about future results.

These valuation concerns are not just unique to FedEx, though. Rivals UPS (UPS) and Old Dominion (ODFL), while they're dealing with similar operational issues, are both resting at near 52-week highs. For that matter, it seems the entire transportation sector, which includes Genesee & Wyoming (GWR), are all "on the move." This group has had an incredible run, but I just don't believe that it can continue for much longer, especially with shipping volumes on a perpetual decline.

In the case of FedEx, it's tough for me to ignore the cautious tenor of the company's own management. While it's also possible that management just wants to lower expectations to not set the company up to fail, I can't entirely discount that it could be telling the truth. Given that the stock has -- in my view - risen significantly above the company's performance, it's best to err on the side of caution here.

At the time of publication, the author held no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a co-founder of StockSaints.com where he serves as CEO and editor-in-chief. After 20 years in the IT industry, including 5 years as a high school computer teacher, Saintvilus decided his second act would be as a stock analyst - bringing logic from an investor's point of view. His goal is to remove the complicated aspect of investing and present it to readers in a way that makes sense.

His background in engineering has provided him with strong analytical skills. That, along with 15 years of trading and investing, has given him the tools needed to assess equities and appraise value. Richard is a Warren Buffett disciple who bases investment decisions on the quality of a company's management, growth aspects, return on equity, and price-to-earnings ratio.

His work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

Jim Cramer's protégé, 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
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, 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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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.
Submit an article to us!

Markets

DOW 17,678.70 +6.10 0.03%
S&P 500 2,057.09 +5.27 0.26%
NASDAQ 4,771.7630 +13.8840 0.29%

Partners Compare Online Brokers

Free Reports

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