New Trade for December 1st, 2020

Wall Street is back in Rally mode this morning after stumbling yesterday.  Tech and healthcare were the only sectors to close in the green yesterday.  While the Dow lost 271 points in yesterday’s session, the 30 stock average closed the month of November with a nearly 12% advance for its best month in more than 33 years.  Astonishing.  December seems to be off to a good start so far, we’ll see how it goes. 

Are you worried that you missed the boat on e-commerce and shipping after the head spinning run up?  Well, don’t be.  In today’s trade we’re highlighting a firm that is positioned for even more gains through the holiday season and beyond.   

FedEx (FDX) is up over 73% in the past 12 months.  Like other companies near record highs FedEx is benefitting from a surge in e-commerce during the pandemic.  It’s also worth noting that shipping capabilities are down on commercial flights and FedEx has picked up the slack.

The company decided not to give guidance for the remainder of FY21, but CFO Alan Graf did say that “based on the current trends in our business, we anticipate increased demand to result in higher revenue and operating income at FedEx Ground and FedEx Express for the remainder of fiscal 2021.”  

E-commerce is booming at holiday levels for the company.  COO Rajesh Subramaniam said that “as we look to Q2, we enter what we  expect to be a peak holiday shipping season like no other in our company’s history.”  

Although FedEx’s increased stock price may seem to give a lofty valuation, it’s actually in line given how the transportation stock was priced when it was generating similar net income.  

If FY21 is comparable to the company’s record earnings per share in 2018 of $16.79, then the stock would have a P/E/ ratio of just 10.4 — given its current price.  Therefore, FedEx is arguably a good value as long as its earnings continue to keep pace with its stock price. 


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