Introduction – FedEx
FedEx (FDX) preannounced an earnings shortfall and the stock price is down more than 20%. Investors with a short-term orientation typically react badly when the stock price falls. Nevertheless, I believe a more levelheaded and thoughtful reaction is warranted. For starters, FedEx is not going out of business, nor is it going bankrupt. Furthermore, based on what we know today, the shareholder-friendly actions remain intact. They recently maintain their dividend, and publicly stated they were committed to the generous share buyback program in place.
The important takeaway is for the investor to decide whether the price drop is warranted and justified by the fundamental deterioration, or is the market overreacting? From where I sit, I still believe that the long-term opportunity in front of FedEx is intact and all we are experiencing is a temporary interruption. The company has historically been well-managed and appears to have a plan in place that will enable them to prosper over the long run. In short, I believe that any risks with FedEx are currently baked into the price. This may not be the perfect time to invest, but I must believe it is a great time to invest for those with a long-term horizon and perspective.
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Disclosure: Long FDX at the time of writing.
Disclaimer: The opinions in this document are for informational and educational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned or to solicit transactions or clients. Past performance of the companies discussed may not continue and the companies may not achieve the earnings growth as predicted. The information in this document is believed to be accurate, but under no circumstances should a person act upon the information contained within. We do not recommend that anyone act upon any investment information without first consulting an investment advisor as to the suitability of such investments for his specific situation.