18 Sep FedEx – Update
FedEx reported earnings after the close last night that were below analysts’ estimates and further reduced their 2020 outlook from $13.25/share to $10 – $12/share. That is a huge reduction and the stock is down roughly 12% as a result. As you know when I purchase a stock for you it is with the idea of not selling unless the price becomes significantly overvalued or the business changes for the worse. In FedEx’s case business appears to be changing and management continues to find reasons for the disappointments such as tariffs, manufacturing slowdown, global growth worries, competition etc. The thesis behind the original purchase was simple – there were 2 major players competing in the global growth of e-commerce and overnight shipping. That should have left plenty of room for both of them to grow profitably.
The last 3 years have seen FedEx spend aggressively on new hubs, airplanes and additional ground delivery only to see profits remain flat. The business seems more competitive, capital intensive and less profitable than I originally thought. Unless there is something that changes my near-term outlook I plan on selling the shares on any rally in the price. I apologize to those of you who lost money on FedEx and I hope to recover the losses going forward.
Thank you for the opportunity to work together and please call me with any questions.