Just when the market was starting to feel good about itself in a Stuart Smalley kind of way ("I'm good enough, I'm smart enough. ..."), it hits an oil slick. $60 barrels of crude put a damper on investors' mood -- especially for Motley Fool Stock Advisor pick FedEx
This recent highflier dropped back to earth yesterday, losing 10% of its value despite some decent figures. FedEx's latest quarterly report estimated that higher fuel costs would limit fiscal 2006 earnings to between $5.20 and $5.45 per share, below consensus estimates of $5.48. United Parcel Service
Understandably, FedEx shareholders are probably scratching their heads. The company's estimate missed the consensus by just 1%, but its stock took a Mike Tyson-sized 10% hit. Crazy, isn't it? For value investors, though, the market's loony inconsistency may signal opportunity.
What do bargain FedEx shoppers get at today's price? A well-oiled machine that just wrapped up its fiscal 2005 figures with revenues up 18.8% to $29.4 billion, operating margins 2.6% higher than the previous year, and net income up 73% to $1.5 billion. But that's last year, right?
Looking ahead, FedEx expects earnings per share to grow approximately 12%. Even more importantly, it anticipates improved cash flow. At a price tag of 15 times fiscal 2006 earnings, this is not a bad deal.
Negative sentiment from high oil prices and the "woe-is-me" crowd could bring further short-term weakness to FedEx's stock. Potential investors should consider buying in stages; make your first purchase at today's price, then wait to see if you can buy more shares for even less.
In the long run, shareholders will be glad they bought today -- especially when the Stuart Smalley market returns.
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Fool contributor Jeremy MacNealy does not own shares in any of the companies mentioned.
