FedEx (FDX) a solid investment for the growth portfolio

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FedEx (FDX) a solid investment for the growth portfolio

Published Date: 2018-10-04 | Source: Share Picks USA | Author: Bruce Ingram | Comments

FedEx (FDX) a solid investment for the growth portfolio

The company was started in 1971 and listed on the NYSE in 1978. Today the company owns 670 aircraft, 180,000 vehicles and operates from 5,000 hubs. FedEx delivers 14 million shipments every day.

In September FedEx reported first quarter results. The market did not like these results and the share price dropped from $256 to $239. The results were impacted by wage and bonus increases as well as a decline in global trade. The US - China trade war is also impacting FedEx's business.

The global e-commerce market is growing and will continue to grow for the foreseeable future. Therefore, companies like FedEx, UPS and DHL will continue to see significant revenue growth in the future.

FedEx has now started deliveries 6 days a week instead of 5. This should result in earnings growth without any capital investment, resulting in improved margins. The 6 day a week delivery schedule comes at the right time to benefit from the Christmas season rush. The benefits from the TNT acquisition should begin to produce results in the near future as well.

The company is forecasting revenue growth of 9% and earnings growth of 7.9% for 2019.

FDX has a credit rating of BBB by S&P

The P/E ratio is 20.5 which is below the industry average of 21.78.

The dividend yield is 1.08% and has grown for more than 20 years. The dividend yield is 54% above its 5 year average yield, a good indication that the share could be undervalued. Dividends grew 48% last year and have grown by 16% a year for the last 10 years. Dividend pay-out ratio is low at 14% leaving plenty of room to increase dividends in the future.

FDX is currently trading below its normal P/E ratio. If the share price returns to its normal P/E then an annual ROR of 27% can be expected over the next 12 months or 21% over the next 24 months.

FedEx is potentially a good solid investment for the growth portfolio.


Disclaimer: Please note that I am not a Registered Financial Planner. The articles I write are based on my own personal research and for my own use and is not to be construed as financial planning advice. At all times readers are urged to exercise caution when investing in any financial instruments, to do their own research


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