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FDX – Market expectations are for Uniform ROA to recover, but management may have concerns about capacity, their capex strategy, and SmartPost

February 26, 2021

  • FedEx Corporation (FDX:USA) currently trades near historical averages relative to UAFRS-based (Uniform) earnings, with a 23.5x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may have concerns about shipping capacity, capex strategy execution, and SmartPost’s value proposition
  • Specifically, management may lack confidence in their ability to ramp capacity for peak shipping seasons, execute their capex strategy without delays, and sustain SmartPost yield growth. In addition, they may be exaggerating future business shipping demand, the strength of their portfolio, and the expertise within their operating companies. Furthermore, management may lack confidence in their ability to optimize the FedEx Express International business and enable various shipping segments to collaborate with each other. Moreover, they may have concerns about the attractiveness of SmartPost’s value proposition and the pace of recovery for retail and manufacturing industries. Finally, management may be exaggerating the benefits of their retail convenience network and the potential of their service providers’ route optimization technology