Last close: $106.46 (U.S.) a share
52-week trading range: $83.80 to $109.66 a share
Annual dividend: 56 cents a share for a yield of 0.53 per cent
Analysts’ ratings: There were 20 buys, 9 holds and 2 sells, according to Bloomberg data. Target prices ranged from $95 a share estimated by RBC Dominion Securities analyst John Barnes to $130 a share by Wolfe Trahan analyst Scott Group.
Recent history: Shares of the Memphis, Tenn.-based parcel delivery giant began to take flight late last year after struggling for most of 2012. Its stock, which surged to a 52-week high last week, has gained nearly 13 per cent (including dividends) over 12 months amid some signs of an improving U.S. economy. FedEx, which ships packages mainly by air and gets 70 per cent of sales from the United States, pledged last October to boost profits by $1.7-billion within three years by cutting costs and jobs to boost its margins. The company reports third-quarter results on Wednesday before the markets open.
Manager insight: FedEx earnings are watched closely because they are a bellwether for economic activity. The company will benefit as the U.S. economy continues to recover, and the Asian economies start to rebound, says Lorne Steinberg, president of Lorne Steinberg Wealth Management Inc. “I would like to hear that there has been some stabilization in terms of their business in Asia. It had been lower-than-expected in the last few quarters.”
The Street is looking for about $1.38 a share. “We think that it is possible that earnings could be a little bit higher than that,” said Mr. Steinberg, who is eyeing FedEx shares for an imminent purchase. “They have been a smart acquirer of companies, most recently in France and Brazil, and are expanding in places like Africa and Turkey. All those things should probably help this quarter’s numbers.”
FedEx, which has a strong balance sheet and low debt, will benefit from the longer-term trend of consumers shopping on the Internet through sites like Amazon.com. The biggest negative near term is that FedEx could lose come of its business with the U.S. postal service when a huge contract comes up for renewal this fall. FedEx now gets the lion’s share compared to its rival United Parcel Service Inc., he said. “There will probably be a little more balance [in the future].”
Based on prospects for an improving global economy in 2014, including Europe getting out of recession, and FedEx making some more acquisitions, the company could have earnings growth in the 20 per cent level in 2014, Mr. Steinberg suggested. “This stock could be trading at 13 to 14 times next year’s earnings. We think it could be a $125 stock.” While he owned FedEx in the past, he sold his shares in the growth company several years ago as the global economy was losing steam. “This is somewhat of a trading stock,” he acknowledged.