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Non-Tech : FedEx (FDX) -- Ignore unavailable to you. Want to Upgrade?

To: JakeStraw who wrote (416)	9/14/1999 6:18:00 PM
From: Darryl Olson	Read Replies (1) \| Respond to of 524

FDX upgraded to buy From the Yahoo board: 9/9/99 FDX upgraded to "buy" FDX, the package-delivery giant that owns Federal Express, has tumbled in sympathy with transportation and Internet stocks. But the company's profit prospects remain bright, thanks to a strong domestic economy, rising shipments for electronic commerce, and recovering international markets. The stock has slumped more than 30% over the last three months, presenting a good entry point for patient investors. The stock is being upgraded to "buy" for four primary reasons: An attractive valuation. At 21 times trailing 12-month earnings, the stock trades at a 42% discount to the S&P 500 Index one of the largest spreads in the 1990s. FDX trades at 18 times expected fiscal 2000 earnings of $2.44 per share, a roughly 30% discount to the S&P 500. Strong earnings momentum. Partly because of strong May-quarter results, consensus estimates for fiscal 2000 per- share earnings have climbed $0.05 over the last two months, to $2.44. Projected per-share profits for 2001 are $2.78, up from $2.52 two months ago. May-quarter earnings soared 29% as both Federal Express and the RPS ground-transport unit posted strong results. Long-term earnings growth should be around 13%, compared to about 7% for the S&P 500. Improving returns. Returns on equity and assets rose impressively in the May quarter. Return on assets was 6.1% - the first-ever move above 6%. At 14.4%, return on equity topped the previous record of 14.3% set in the February quarter of 1995. Strong cash flow. May-quarter total cash flow rose 18%, to a record $490 million. At around eight times trailing per-share cash flow, the stock trades well off its April high for that ratio of 11. With spending on its global network likely to abate, FDX should begin to generate free cash flow next year. Expanding heavy-freight operations Earlier this month, FDX agreed to acquire for about $116 million the assets of GeoLogistics Air Services, a freight forwarder between the U.S., Puerto Rico, and the Dominican Republic. FDX will gain GeoLogistics' facilities, 300 employees, and book of customers. The company, which charters all of its aircraft, specializes in heavyweight and oversized medical, pharmaceutical, and technology shipments. The demand for heavy freight is growing rapidly, keyed by just-in-time inventory methods. In recent years, FDX has spent nearly $600 million to establish a domestic infrastructure that could accommodate heavy freight. Before any cost savings, Wall Street expects the GeoLogistics deal to boost per-share earnings by about $0.01 to $0.02. Conclusion Transportation stocks have been stuck in low gear. The Dow Transports are down 15% since closing at an all-time high on May 12. FDX has been hit even harder, sliding 29% during that span. Concerns about rising fuel prices and the uncertain direction of interest rates have weighed heavily on the shares. FDX shares were bid up by Internet investors, so the weakness in that sector may be hurting the stock. Moreover, investors seem concerned that the impending initial stock offering of United Parcel Service makes for a stronger competitor. In addition, Wall Street was not impressed with the company's May-quarter domestic volume growth. FDX's long-term position remains excellent, bolstered by its improving international package business. Shipments to Asia have rebounded impressively in recent quarters, keying a sharp improvement in overseas earnings. Too, the RPS business continues to benefit from a shift from air to ground delivery for certain short-haul routes. An annual report for FDX Corp. (NYSE: FDX) may be obtained P.O. Box 727, Dept. 1854, Memphis, Tennessee 38194 (901) 395-3478. ----- dowtheory.com One of the oldest financial newsletters in the United States, Dow Theory Forecasts has been published weekly sinc