“They’ve seen some improvement in some segments and freight volume is obviously weak and trying to balance out cutting back salaries and workers with the overall global economic recovery to very difficult things for the the outlook for FedEx gloomy.” Fox Business Network 6/17/2009
FedEx Corp. (FDX) has struggled with a sagging economy as earnings are down 56% from last year. However, the company easily cleared the low bar that Wall Street analysts had set for the company. Fiscal fourth quarter earnings were $.64 versus consensus estimates of $.51. Revenues dropped 20% from a year ago to $7.9 billion, dragged down by declines in FedEx Express and FedEx Freight division. Surprisingly, FedEx Ground was one of the bright spots as revenue only declined 1%.
The company’s CEO Fred Smith, a respected economist in his own right, said for the second straight quarter that the company has seen the bottom. Yet his attempted optimism was overcome by the grim outlook the company issued for the first two quarters of fiscal 2010. FedEx is expecting to earn between $.30 and $.45 in the next quarter, which is well below the street’s forecast of $.68.
Clearly, this gloomier outlook is a cautionary signal to the rest of the economy, as FedEx’s revenue is driven by sales of other company’s products. If FedEx is correct in their assessments the recovery might not be as quick as many had hoped or expected. Based on the historical valuation ranges FedEx is Undervalued and could trade in the mid-$60’s given what the market has traditionally been willing to pay for FedEx’s sales and earnings. Even though the next few quarters are admittedly going to be rough for the company at some point in the future FedEx will attract the interest of value hunters. The company will continue to be the standard in shipping and once an economic recovery begins then FedEx’s revenue will perk up with it. But as our readers can attest, we are skeptical that the recovery will be hear in the next few months. So, if you are interested in FedEx perhaps wait for the price to dip even further and then it will be a good stock to buy and hang onto for a while.