Hereâs why Wall Street Connected Profit Like The Pros
Brought to you by: Dear Reader, We have some BIG UPDATES for all you Wall Street Connected subscribers. [And you need to take action now to make sure you don't miss out!]( Our newsletter got a complete makeover. We overhauled the format and layout of the newsletter, making it easier to read and simpler to follow. And gave it a nifty new title - THE SPILL [But you won't receive this newsletter unless you sign up HERE.]( Because pretty soon, Wall Street Connected will disappear FOREVER! Proprietary Data Insights Financial Pros Top Integrated Freight & Logistics Searches In The Last 30 Days Rank Name Searches
#1 United Postal Service 165
#2 FedEx 137
#3 C.H. Robinson 34
#4 JB Hunt 28
#5 XPO Logistics 10 Sponsored [Man who called 2020 Crash: Huge Event in 2022]( A historic event in 2022 will cause a massive shift in the wealth divide. It could soon impact the wealth of thousands of Americans. [More here.]( Stock Analysis FedEx Is Stupid Cheap It sounds a bit weird to say that a +$60 billion company is cheap. Yet, thatâs exactly how we would describe FedEx (FDX). With earnings scheduled for March 17, we expect FedEx to outperform the market over the next year. Even though itâs the second most searched integrated freight and logistics stock amongst financial pros, we expect that volume to pick up as we near March 17. You see, FedEx is already down +20% from its all-time highs last April while United Postal Service (UPS) made new all-time highs last week. In fact, FedEx trades below its highs from 2016 to 2018. Now you might think that signals relative weakness. But for a company trading at less than 13x next yearâs earnings and 7x next yearâs cash flow, we see it as a discount. And pricing power allowed the company to increase rates an average of 5.4%, which we expect to help maintain margins. Hereâs how it all fits together. FedExâs Business Headquartered out of Memphis, Tennessee, FedEx Corp is a global leader in logistics and deliveries across various segments. The company reports through four main categories: Express offers time-definitive delivery to more than 220 countries and territories around the world. Ground offers low-cost, day-certain services in the U.S. and Canada, as well as residential delivery in the U.S. through FedEx Home Delivery services. Within the ground segment, FedEx offers SmartPost that focuses on consolidating and delivering high volumes of low-weight, less time sensitive business to consumer packaging. FedEx Freight accounts for less-than-truckload freight transportation. Interestingly, FedEx has grown from <10% of the LTL market share by revenue to closer to 18%. Earlier, we mentioned the price increases management plans to implement in 2022. The chart below breaks these out by the different segments. Lastly, we want to highlight managementâs long-term financial goals. These are important given what we expect to be a profitable, yet challenging environment in the coming years. A 10%-15% EPS growth per year for a company of FedExâs size would be huge as would a +10% operating margin. We like to see the focus on both improving cash flows and returning value to shareholders. Financials Revenue-wise, FedEx has a 10-year average growth of 7.89%, which was barely down in 2020 before accelerating to 21.3% in 2021. Thatâs on top of a net income 10-year average growth of 13.67% and EPS of 15.58%. Interestingly, margins slipped in more recent quarters from the high water mark in May of 2021, but are still above historical averages. Thatâs why the companyâs focus on a +10% operating margin could be a huge boon to shareholders. The Digital Currency Summit 2022. During the event, 47 of the world's top crypto experts will share their list of the best investments for the current crypto market. Including the hottest altcoins expected to hit record highs this year. These experts believe crypto is the #1 wealth-building opportunity of 2022. [Click here and reserve your spot now.]( Notably, in 2021, operating cash flow nearly doubled while free cash flow went from -$771 million to +$4.251 billion, a huge swing. While thatâs tempered a bit, forward estimates still put FedExâs cash flows at ~$9.31 billion. Weâre also delighted to see capital expenditures come down as a percentage of revenues. That shows managementâs tight fiscal control in place to keep cash flows growing. Lastly, we want to highlight the companyâs long-term debt of $20.4 billion and capital leases of $13.96 billion compared to the $6.83 billion in cash on hand. While those levels are a bit high, with the amount of cash generated each year, they donât place a heavy burden on the balance sheet. Valuation To demonstrate how cheap FedEx is, we threw it up against the top search results from our proprietary data. Starting off with basic valuation measures, FedEx trades at a discount to all its peers with the exception of XPO Logistics (XPO), which is a bit less expensive on the price-to-sales ratio, price-to-cash flow, and enterprise value to sales. However, when we look at the growth metrics, we find more reasons to be bullish about FedEx than XPO. Although YoY revenue growth was phenomenal for XPO, analysts forecast negative growth going forward. And when you look back at the compounded annual growth over multiple years, FedEx does much better with the exception of net income and EPS over the last 3-years which was impacted by poor performance in 2019 and 2020. We think a key selling point for FedEx is the companyâs relative profitability. Compared to its peers, FedEx boasts the highest margins in nearly every category with the exception of net income and EBITDA. And even then itâs still just slightly lower. Our Opinion - 8/10 FedEx is a fantastic company with a strong vision for the future. Like others, they face labor headwinds and cost challenges. Yet, managementâs focus on margins should keep these in line until external pressures ease. And thatâs when the real climb in shares should begin. [Make sure to sign up for The Spill to keep receiving our premier investment newsletter.]( #
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