FedEx Stock Prediction For 2019 (Buy or Sell?)
FedEx Corporation (NYSE: FDX) has struggled so far in 2018 with its share price falling by almost 20%. However, the stock has the potential to rise as current problems fall behind in the rear-view mirror.
Will FedEx stock improve in 2019? Alternatively, will it remain affected by the problems it has been plagued by in 2018?
In this edition of Investing Daily we will discover:
- What makes FedEx stock attractive?
- FedEx’s stock performance in 2017 and 2018.
- Should you buy FedEx Corporation?
- Should you sell FedEx Corporation?
- Overall forecast and outlook for FedEx stock in 2019.
Let’s get into it!
Who is FedEx Corporation?
FedEx Corporation provides a portfolio of transportation, e-commerce, and business services through a group of companies that are managed collaboratively under the FedEx brand.
The business segments under FedEx Corporation include FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services.
The company has a market capitalization of approximately $60 billion and has unique business strategies to keep ahead of the competition.
What is FedEx Stock History?
The stock of FedEx has always performed well, with minor ups and downs. Since the inception of the company in 1971, the stock has mostly shown an upward trajectory as it expanded to become one of America’s premier shipping options.
There have been some difficult years like 1987, 2007, 2008, 2011, and 2015 owing to major changes in the market circumstances, the company’s stock has shown a positive annual change.
How Has FedEx Performed in 2017/2018?
The stock of FedEx Corporation performed quite well in 2017. The stock showed a 24% annualized rise in 2017, compared to the 18% increase of the S&P 500, making it a good year for the investors.
The financials of the first quarter of 2017 were dampened by a NotPetya Malware “infection” and the company’s worldwide systems became infected. However, the effect was mitigated by the overall improvement in the global economy and pickup in the global trade.
FedEx also demonstrated excellent profit growth in the express segment through its profit improvement plan that led to cutting costs, optimizing efficiency, and modernizing the air fleet. All the factors combined caused FedEx stock to experience a fabulous 2017.
However, despite strong earnings reports and profit improvement guidance, FedEx stock dropped almost 20% YTD.
The company reported earnings of $15.31 per share in fiscal year ended May 31, 2018, exceeding consensus of $15.13 and received a benefit of $1.6 billion from the new tax laws. Despite the forward-looking earnings reports, the stock plunged due to escalating fears of a trade war. As a result of Trump administration’s trade war and tariff initiatives, the free flow of goods between countries will be hampered, which caused the stock of FedEx to perform negatively.
Thus, the increasing trade tensions do not go well for the future of FedEx and have caused the stock to go down, with chances of further affecting the stock.
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Who Are Fedex’s Rivals?
United Parcel Service, Inc.
The most significant competitor of FedEx Corporation is United Parcel Service, Inc. (UPS). Both are global courier delivery services, with UPS being the larger one with a net income of $5 billion and revenues of $54 billion in 2017.
While FedEx has a sizeable market share in the United States, the larger share of UPS revenues comes from Europe. However, in spite of the larger size of UPS, the stock of FedEx has outperformed UPS on a five-year basis.
The stock of FedEx has risen nearly 158% from 2013-2017 compared to a 65% rise in UPS stock price. This is because of the positive impacts of the self-help initiatives taken by FedEx to benefit from the growth in global trade. Overall, both companies have taken advantage of the e-commerce effect.
Will FedEx Go Up in 2019 (Should You Buy)?
FedEx has reported strong financials in the recent past quarters. The market has a bullish sentiment towards the stock of FedEx as there are significant expectations of growth in earnings in the coming quarters.
Analysts have forecasted a significant growth in fiscal 2019. The revenue estimates have increased by 2.5% to over 9% compared to fiscal 2018. At the same time, earnings are also expected to grow 16.5% and EPS is expected to be between $15.85 and $16.45, up from the prior forecast of $15.65 to $16.25. The operating margin is expected to be 7.9%.
The stock of FedEx is also underpriced at the moment due to the fear of the trade war. If a trade war were to break out, the trade relationships between developed countries (particularly trading partners of the U.S. that FedEx services) would be adversely affected, and this will have a negative impact on the performance of the logistics companies like FedEx. Therefore, the stock price of FedEx has fallen since the beginning of 2018.
So, according to our recommendation, FedEx is a very good medium-term investment. The company has strong fundamentals and is well-positioned to grow well.
Read Also: Should You Buy Amazon Stock In 2019
Will FedEx Go Down in 2019 (Should You Sell)?
It is important to review both sides of the coin when reviewing the stocks.
Let us take a look at the bearish sentiments concerning FedEx stock.
The performance of FedEx stock became doubtful after the company released the earnings report for the first quarter of fiscal 2019. The earnings report was a miss on the earnings.
Adjusted earnings reported were $3.46 per share, compared to consensus of $3.78 per share. Investors were not pleased with the miss, and the stock of FedEx plunged by 2.2%. The miss can majorly be attributed to weaker pricing as the US domestic revenues did not show any increment. The earnings were also impacted by the 48 cents per share effect of compensation and benefits.
Thus, in spite of the strong financial expectations, the earnings targets were missed in the first quarter of 2019, and the stock went spiraling down. It would be wise to sell the stock before the prices go further down due to the financial weaknesses being experienced by the company.
Overall FedEx Forecast and Prediction for 2019
It is, indeed, proven that the stock price of FedEx got negatively impacted by the miss on the first quarter of fiscal 2019 earnings. However, despite the notable miss, the company has increased its EPS guidance for fiscal 2019 from $17.20 to $17.80.
The miss can be attributed to substantially high variable components accrual in the quarter which led to a negative impact of $0.48 per share.
In spite of the miss on targets, the company is very optimistic about its prospects. The management is confident of achieving profitable growth and improving operating income. The higher expectations in the future are also based upon strong US economy and the continuation of the revenue growth initiatives by the company.
This supports the analysts’ reports that the market is bullish towards FedEx. The stock price is expected to keep growing steadily, and the stock is underpriced at just 14x forward EPS estimates. Therefore, the overall forecast and prediction for FedEx stock for 2019 is that it is a Buy. It is an excellent investment for medium-term investors looking at return on investment in 3-5 years.