I'd like to, but I can't.
Bad news and good news
FedEx grew its sales 6% in comparison to last year's Q2. Unfortunately, "substantially higher fuel costs" and reduced demand among customers such as 1-800-Flowers
Still, all this was better than expected. While CEO Fred Smith lamented "softness in U.S. industrial production," he said "solid international growth" helped to offset some of that domestic weakness. Fuel prices are high, and they hurt last quarter's earnings, yet Smith remains "confident about long-term prospects in all our business segments."
So in sum, a weak quarter, but not disastrously so, and plenty of hope for an eventual recovery. Where's the harm in that?
The harm, as I see it, lies not in last quarter's weakened margins. And not in management's prediction of yet another earnings decline in the current, third fiscal quarter (since you ask, they're expecting between $1.15 and $1.30 per share, down from last year's $1.35). No, the problem I've got with FedEx is its valuation.
Earlier this week, I mentioned that "from a free cash flow perspective (my preferred metric), the shares look awfully pricey at nearly 40 times trailing cash profits. I'd want to see the price come down quite a bit, or the cash start flowing more freely, before buying into this one." Well, post-earnings, the price dropped only a little, and then bounced back.
Sure, FedEx is a great company. Granted, it has a wide moat around its business. But peer UPS
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