FedEx Update April 30, 2018

FedEx is updated ad rated Buy at $247. This stock is down 1% this year to date but that was after rising 34% in 2017. Given that large rise in 2017 I was predisposed to thinking this stock would rate no more than a Hold rating. But its earnings have increased strongly lately with an additional large boost from the lower income tax rate.

All else equal, we can expect earnings to increase fairly sharply, on a year over year basis, in each of the next three quarters. And analysts do expect that as they appear to forecast earnings growth sufficient to move the P/E from the current 17.0 to 14.2. But if investors were convinced this is true then the stock price and P/E would likely be somewhat higher.

Those owning this stock should probably continue to hold. I don’t own it but I now plan to open a small position and I would add to that on dips (or just be satisfied with the small position if the stock rises).

I added a new row near the top of this report that looks at FedEx as a long-term creator of value. The record on that score is extremely good.

As Buffett might put it, if you had entrusted founder (and still CEO) Fred Smith with $750 (the IPO price adjusted for splits was 75 cents) at the IPO in 1978, and held, he would have turned that into $247,000 as of today. And, your current dividends on those 1000 shares would be $2000 per year! (Now, all we need is a time machine.)