“FedEx ( (FDX) ) tanked over $22 per share on Sept. 21, after reporting disappointing results for the quarter ended Aug. 31," Paul Price wrote recently on Real Money. "Analysts who loved it last May near $320 were swearing at it as they sold in the $228 - $230 range. I didn't hear one money manager on CNBC that was enthusiastic about buying, or adding to the stock even as it set a new 12-month low."
Yet as Price notes, "The firm's long-term record has been excellent. Over the full decade ended last May every major business metric rose substantially."
To be fair "The shares were a bit expensive, relative to their own normalized valuation last spring. It should have been no surprise, then, that the stock regressed on worse-than-projected profitability. At about $229, though, FedEx appears modestly undervalued on the newly issued, $18.75 or so, fiscal year 2022 guidance.”
So what’s been going on here? Of any industry, a shipping and delivery service feels like one that should have done thrived the pandemic years. Yet when it comes to FedEx that seems not to be true.
“Like many firms, FedEx is experiencing higher labor costs and inflation in materials. Price increases ranging from 5.9% to 10% or so have already been announced. Future results should start benefiting from that within 90 to 120 days."
And even at the reduced estimate for fiscal 2022, the company would be hitting an all-time record. "FedEx's future looks as bright as ever after getting past this two- or three-quarter speed bump. Seeing FedEx back at $270 - $290 within a year seems like a very good bet.”