GrowthRater model portfolio: Adding FedEx (FDX) at $143
If you’re looking for a US cyclical to rotate into after Yellen’s performance of ignoring all her own data and refusing to put up rates, then I think FedEx may not be a bad home and as a consequence we are adding this stock as a long to our model portfolio with the shares having closed at $143.1 yesterday
Q3 results came in which was more of the same after Q2, with another +3% rise in Domestic packet volumes and a slightly firmer margin advance (+90bps) despite getting caught short on capacity over the holidays and having to contract out some expensive transportation to make good the shortfall. For the FY16 they remain in track to make their +20-22% EPS guidance and next year they should have TNT in the portfolio to leverage.
As you can see from the below relative share price performance, the shares came off the boil at the start of the year along with other cyclicals. The Op FCF yield however is now approaching 6% for the current year which is not too shabby for this group and puts the growth rating into the lower end of their historic +4.5-5.5% CAGR range.
As always, you can get more on this (including amending the revenue growth expectations with your own assumptions and re-modelling the valuation) at: