FedEx’s stock (FDX) amounts to an inexpensive bet on higher margins, better earnings, and greater free cash flow. Its shares, at $205.74, have changed little since mid-2017, badly trailing the S&P 500 index. The stock looks appealing, valued at 10 times projected earnings of $20.45 a share in its fiscal year ending in May and nine times estimated earnings of $22.61 a share in the next fiscal year ending in May 2023.

Fath says it’s rare to find a company in what amounts to a duopoly with such a low valuation. FedEx has a 30% market share in its ground business, behind industry leader UPS. In comparison, the four big U.S. railroads operate as two duopolies east and west of the Mississippi River and trade for about 20 times earnings.

The opportunity in FedEx can be summarized like this: FedEx and UPS have similar annual sales, but FedEx has just a third of its chief rival’s market value. FedEx is expected to have $93 billion in sales, while UPS should have $102 billion in 2022 sales.…

Could Buffett be interested in acquiring the whole company? BRK could easily afford it and would be the elephant he has been hunting. He has spoken words of admiration for FedEx founder Fred Smith in the past and Smith would most likely not oppose a deal at the right price.


FedEx’s stock (FDX) amounts to an inexpensive bet on higher margins

FedEx’s gross and operating margins are very much in historical range. Same goes for capex. Not sure how they can increase their margin.

FWIW, at least here there is a conspicuous difference between FedEx and UPS in how they treat their employees, and the subsequent ripple effect on the customer experience.

The FedEx counter service randomly toggles between efficient and surly. The deliveries are made at random times, more often than not 24-28 hours after the original schedule. (The site will promise a delivery on the 1st literally until around 10 pm on the 1st, and only then update it to the second. Or the third. Or (more commonly) uh, we’re not sure, will have to get back to you.)

UPS delivers parcels when promised at around the same time every day. The drivers are professional and cheerful. (And, their rates are good – I now routinely use them for shipping any packages to friends and family. The site is seamless, there’s always a 10-25% discount code, the driver picks up the prepaid boxes, and they arrive when promised)

The FedEx guys are all contract deliverers. The current guy is a chain-smoker who always looks harassed/tired

At UPS, they are employees with benefits. The current guy is a nice fella, and professional.

Kind of a WalMart/Costco dichotomy.




I bought a slug of FDX around $205 in March and here we are a couple of months later and the shares still sit at around $205. Fortunately they have out performed the S&P by ~10% over that period. The shares rarely trade under 10x eps, which would give a price target of ~$175-180 as an attractive entry point. I am using a normalized earnings range of $14-17.50/sh to estimate returns over the next ten years and feel fairly confident that you can get between 10-12% per year at current prices. FDX, Google, and BRK are currently on my radar with 25% cash fully locked and loaded.