Is There Upside Ahead for FDX Stock?
A $100,000 investment in FedEx Corporation (NYSE:FDX) stock five years ago would now be valued at $240,950. With such stellar returns, is there more upside ahead to get excited for? Or is all the good news in the past? I have conducted my personal research on the company and will provide an assessment.
FedEx, as you may already know, provides domestic and international air express package and heavy freight deliveries, as well as logistics services, in over 220 countries around the world. The Memphis, Tennessee-based company also assists other businesses with their transportation, e-commerce, and daily operational needs. FedEx brands include “TNT Express,” “FedEx Ground,” “FedEx Freight,” and “FedEx Services.”
Rewarding Shareholders
FedEx’s dividend is $0.50 per quarter, having doubled over the past 18 months and up 233% since 2014. The dividend is currently on a seven-year growth streak, rising every June as part of the review. What can be taken from this is that cash flow is on the rise, and every internal decision is made to ensure that continues.
Share buybacks are also occurring. Between fiscal 2014 and 2016, there has been about $8.0 billion in returns via the buying back of over 57-million shares. The current plan is for the repurchase of up to 25-million shares. As you’re likely aware (and any regular reader of my articles should be), share buybacks make the remaining shares worth more, boosting investors’ ownership stake. (Source: “FedEx Announces 25 Million Share Repurchase Program,” FedEx Corporation, January 26, 2016.)
Both the dividend hikes and share buybacks are possible because less than 20% of each dollar earned is put towards the dividend. That said, one option FedEx has is to increase the amount that is paid from each dollar, which it could easily afford to do.
Oligopoly
FedEx shares its market with only a handful of other companies, meaning it possess a very large market share while facing little to no new competition. This is in part due to
the large of amount of capital needed to enter the market. For example, a new company would have to purchase or otherwise gain access to airplanes, delivery stores, warehouses, and software, spending millions, if not billions, before a single cent of revenue is earned. Having already established its foothold, FedEx’s earnings are protected.
This protection is evident in the past earnings per share (EPS), detailed below:
| Year | Annual EPS |
| 2014 | $7.06 |
| 2015 | $8.95 |
| 2016 | $10.80 |
| 2017 | $12.30 |
From 2014 to 2017, earnings have risen 74%. As you can see, earnings are always on the rise, with no down year. The same could be said for future estimated earnings, listed below:
| Year | Estimated Annual EPS |
| 2018 | $13.56 |
| 2019 | $15.50 |
| 2020 | $18.08 |
| 2021 | $19.27 |
Estimated future earnings are in the double digits. Needless to say, higher earnings can help support a higher stock trading price, dividend hikes, and share buybacks.
Final Thoughts About FDX Stock
FedEx appears to have a lot more upside, which is why it’s important to look at the company in detail, and not only at the stock chart performance.
FDX stock is currently offering a dividend yield of 0.93%, based on a trading price of $215.05. This yield may throw you off at first, but more time is spent owning the company and the current dividend growth both result in a higher dividend per share. FedEx has grown its earnings both in the past and present and looks to continue to do so in the future, which is why FedEx stock should be considered.
Also Read:
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