Will FedEx Deliver Returns in the Near Future?

With shares of FedEx Corporation (NYSE:FDX) trading at around $90.09, is FDX an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

The most interesting news coming out about FedEx is also the least important, but it deserves a mention. Former employee, Alan Elam, sent an email to authorities saying that FedEx was systematically overcharging its business customers by charging residential fees for non-residential addresses. You could say that FedEx has the right to charge whatever it wants, which makes sense, but it’s assumed that FedEx was charging different rates than advertised. However, that is not confirmed, as the entire story hasn’t been revealed yet. We do know that FedEx attempted to keep this story confidential, which surely doesn’t look good on their part. All that said, this story will only have a minimal impact on the stock price, if any at all.

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In more important news, companies around the country are cutting capital expenditures ahead of the fiscal cliff, and FedEx fits is in that category. This is significant, and despite the repetitiveness of the subject of the fiscal cliff, many investors still don’t seem to recognize its magnitude. It’s obviously hopeful that a deal will be worked out, but it will have to be a deal that doesn’t put a severe shackling on the economy. Also keep in mind that FDX got hammered during the financial crisis of 2008.

Even if everything works out with the fiscal cliff, there are still other concerns. Perhaps the most important concern at the moment is that Wal-Mart has decided to go with United Parcel Service (NYSE:UPS) for its same-day shipping. This isn’t good news, but FedEx will likely attempt to make similar deals down the road.

On the positive side, margins are still moderately healthy and FedEx is winning the ground game thanks to FedEx Ground’s consistent and impressive performance. FedEx Freight hadn’t been performing well for a significant period of time, but that trend seems to have changed – at least for now.

Let’s take a look at some important numbers for FedEx.