April 16, 2018

FDX – Market expectations are for record-high Uniform ROA, but management has concerns about demand, operating profit, and competitive differentiation


      • FedEx Corporation (FDX:USA)currently trades near historical highs relative to UAFRS-based (Uniform) Assets, with a 1.6x Uniform P/B, implying bullish expectations for the firm. However, management has concerns about demand, operating profit, and competitive differentiation
      • Specifically, management may lack confidence in their corporate-wide operating profit guidance, and may be concerned about higher salaries and wage expenses as a result of the TCJA. Furthermore, they may be exaggerating their efforts towards environmental efficiency, and may lack confidence in the sustainability of improvements in the U.S. industrial economy. Moreover, they may lack confidence in the sustainability of strong performance in FedEx Freight, and may be exaggerating their competitive differentiation as a result of their long-term investments
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