Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of FedEx Are Up Today

By Lou Whiteman – May 26, 2020 at 3:54PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors are hoping the worst of the pandemic is now behind us.

What happened

Shares of FedEx (FDX -2.52%) gained more than 7% on Tuesday as investors cheered promising signs of an economic recovery. FedEx and other transport companies have been hit hard by the COVID-19 pandemic, but FedEx is well positioned to rebound if and when the economy begins to recover.

So what

FedEx shares were hit hard in the early days of the pandemic, losing nearly 40% of their value during a period from mid-February to mid-March. The global outbreak slowed economies, cut supply chains, and led to weak demand for shipping services.

A FedEx cargo jet on the tarmac.

Image source: FedEx.

The timing of the pandemic was particularly difficult for FedEx holders, who suffered through a miserable 2019 and were hoping for a rebound in 2020. FedEx shares underperformed last year in part because the company was spending to increase its domestic capacity, but with the economy slowed at least for now, that added heft was not needed.

In April, the company suspended its guidance and moved to shore up its liquidity until the pandemic and its economic aftermath subside.

Investors were optimistic on Tuesday that the worst might be behind us, encouraged by signs of economic normalization over the Memorial Day weekend in the U.S. There was also good news on the COVID-19 treatment and vaccine fronts.

Now what

FedEx is well positioned for the long term, but investors need to be careful that the stock market doesn't get ahead of the economic reality. While lockdowns are ending and economic activity seems to be returning, the pandemic is far from contained and the near-term outlook remains uncertain.

For patient investors, there is a lot to like about FedEx. But the company's recovery still feels like more of a 2021 story than a 2020 story after all that has happened this year. Those buying in today will likely benefit over time, but shouldn't expect it to be a straight shot up from here.

Lou Whiteman owns shares of FedEx. The Motley Fool owns shares of and recommends FedEx. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

FedEx Corporation Stock Quote
FedEx Corporation
FDX
$148.47 (-2.52%) $-3.84

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.