Stock Pick of the Week with Momentum Securities: 27 May – FedEx
Momentum’s leading stockbroking division – Momentum Securities – will be bringing you their Stock Pick of the Week, each week on a Wednesday or Thursday. The stock pick motivation is available as written content and a downloadable video and audio clip.
This week’s pick: FedEx
About: FedEx, also known as FedEx Corporation, is an American multinational company with their main focus on rapid distribution, with the help of leading edge information technology. Making FedEx a leader in convenient and fast delivery services and the world’s largest transportation company.
CEO for Momentum Securities, Steven Schultz shares his insight on FedEx.
Click here to download:
• the audio clip
• the video clip.
“This week’s stock pick has become an essential component of our daily routine and an integral part of today's retail experience. I’m of course referring to the US listed global logistics giant, FedEx.
In a world where days often seem to go by, with the only real conversation with an actual human being, being that of the FedEx delivery man - it might be surprising to learn that the most important business within the company's portfolio isn't in fact door-to-door delivery. But rather, its express air freight business unit, which boasts unrivalled scale and offers attractive long-term growth prospects.
They're well known global brand has become increasingly relevant post the onset of Covid-19 and increased prominence of online shopping. It boasts a high lead to exposure to the secular growth trend of e-commerce, which we believe likely to persist well beyond government imposed global lockdown's.
Between 2016 and 2020, FedEx lost around 50% of its market value, partly due to difficult post acquisition integration of its former competitor, TNT Express, which dominated in Europe. Now, with the acquisition successfully digested, Europe and other international markets currently comprise around 31% of the business’ revenue, with North America continuing to dominate and accounting for the balance.
We believe, FedEx is characterised by great growth potential and that margins have already begun to drift upwards thanks to the synergies having been realised. Perhaps most importantly, FedEx boasts commendable free cash flow generation and trades at a undemanding P/B of around 1.8 and trades on a forward P/E of around 17, which we believe is very reasonable in the US, for a company of this quality.”
