FedEx will be back “with a vengeance”, this fund manager says

FedEx (FedEx Stock Quote, Chart, News NYSE:FDX) has been a dog of a stock for a couple of years now but that’s all the reason to take notice, says one observer.

The company has had some hard days, says fund manager Gordon Reid, but they’re well-positioned to take advantage of both the growth in e-commerce and tech advances that’ll be bringing driverless vehicles to your front door sometime soon.

The Christmas season is now upon us with Black Friday and Cyber Monday in full swing. All good news for FedEx which is calling for record package volume on Cyber Monday where it will move more than 33 million parcels through its global network in response to all those clicks by online shoppers over the weekend.

“E-commerce continues to grow and FedEx is ready to deliver this holiday and beyond,” said Brie Carere, executive vice president, chief marketing and communications officer, FedEx Corp.

“We recognized early on that e-commerce would transform the way our customers shop and ship, and we have invested in a world-class network that flexes to meet volume demands throughout the year.”

The stock may be doing poorly — it’s been trading in the $160 range for much of the year and sits well off its high of $274 hit in early 2018 —but Reid says it’s a buy at this price.

“I would buy it. We own it in our large cap portfolio. It’s not participating [in the market rally] for a reason: they’ve underperformed on a fundamental basis and they’ve been impacted by the trade war,” said Reid, president and CEO of Goodreid Investment Counsel, to BNN Bloomberg on Wednesday.

“They haven’t executed all that well and they’ve had a little bit of bad luck. TNT, which is their European division, was hacked soon after they bought it, a cyberattack, very damaging. That not only cost them a lot of money but it took them a long time on an operational basis to get that operation back up,” he said.

FedEx’s latest earnings report came in September where the company missed on earnings and offered a softer guidance. FedEx posted revenue of $17.05 billion where analysts had forecasted $17.06 billion and adjusted EPS of $3.05 per share versus the consensus $3.15 per share. (All figures in US dollars.)

What’s more, management lowered its fiscal 2020 earnings projection to between $10.00 and $12.00 per diluted share on increased FedEx Ground costs, macro economic trends and ongoing trade concerns.

“Our performance continues to be negatively impacted by a weakening global macro environment driven by increasing trade tensions and policy uncertainty,” said chairman and CEO Frederick Smith said in a September press release. “Despite these challenges, we are positioning FedEx to leverage future growth opportunities as we continue the integration of TNT Express, enhance FedEx Ground residential delivery capabilities and modernize the FedEx Express air fleet and hub operations.”

But Reid says FedEx has a number of trends in its favour.

“They will be back and they’ll be back with a vengeance, for a couple of reasons. One is that technology is their friend. If you think of the FedEx truck and the driver —in a little while, a few years, there’ll be no driver. The delivery will be done by a drone,” Reid said.

“They’re looking by 2025 to double the number of packages that they deliver from 100 million to 200 million. This is a company that has a lot of strong catalysts in the future and it has fallen on some hard times, so you can buy it in an inexpensive way today,” he said.