fears of tepid economic growth, falling below $91 per share. However, spurred by rumors of interest from hedge fund manager Bill Ackman, investors quickly learned you can't keep a good company down. While FedEx is without a doubt an iconic brand and a true leverage play on global economic growth, I just don't believe the 25% gains over the past five months are justified, especially for a company that is clearly in transition. It's certainly possible the company can prove me wrong on Wednesday when it reports fiscal first-quarter earnings. But given how disappointing FedEx's fourth-quarter results were, including a 41% decline in operating income, I'm not betting on it. Now, I do appreciate that there were several one-time charges in that 41% operating income decline, much of which were attributed to the company's restructuring efforts. I will also grant that the company's 4% year-over-year revenue growth was solid and was in line with Street estimates. Nevertheless, the stock, by virtue of its price-to-earnings ratio of 21, is being valued as if this transition is fully complete. To that end, it also seems as if the Street has conveniently dismissed the words of FedEx Chairman Frederick Smith, who stated that his company is facing poor economic growth, while also describing what he sees as a situation where customers have begun to look for "less-costly international shipping services." UPS).
Just to be clear, I'm not suggesting that FedEx is a bad company. Poor shipping volumes or not, I'm willing to credit management for growing free-cash-flow by close to 60%, due (in part) to aggressive cost-controls. This is while the company was able to deliver a 7% year-over-year improvement in adjusted earnings-per-share, which was enough to beat expectations. remain too high. If Smith's words serve as any indication, management is doing what it can to keep those expectations in check. Even so, given the stock's recent gains, I just don't believe Smith's cautious tone has had its intended effect. With that in mind, it's risky to place a bet on FedEx at this level absent clearer signs that the global economic slowdown is truly a thing of the past. I believe investors should remain patient and allow management to execute its long-term strategy of producing value. But it's not going to happen overnight. With the stock trading at around $109 per share, I just don't believe there is much (if any) value left. At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.