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FedEx (FDX) Grapples With Trade War Tension: Time to Dump?

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FedEx (FDX) Grapples With Trade War Tension: Time to Dump?

The ongoing trade war woes coupled with high costs restricting bottom-line growth put FedEx (FDX) in a fix.

Shares of FedEx Corporation FDX have slipped 1% so far this year against the industry’s 2.1% increase.

Let’s unearth the factors responsible for this disappointing price performance.

One of the prime issues ailing the FedEx stock at the moment is the escalating trade war tension between the United States and China. Most recently, China announced plans to file a complaint with the World Trade Organization regarding President Donald Trump's second round of tariffs on $16 billion worth of Chinese goods. What’s worse is that the United States might impose further tariffs affecting businesses and consumers.

With FedEx’s significant exposure to China, the ongoing tiff between the two countries is hampering the company to a large extent due to the potential weakening of trade following the tariffs. Evidently, despite the company’s outperformance in the fourth quarter of fiscal 2018, its shares were significantly down, primarily due to the mounting trade war fears.

Apart from trade war worries, high costs are hurting the company’s bottom-line growth. With FedEx investing substantially in facilities’ upgrade at its key divisions, capital expenses are on the rise. Such steep costs might hit FedEx's bottom line in the first quarter of fiscal 2019 (results will be available on Sep 17). Notably, capital outlay is expected to be $5.6 billion in fiscal 2019. Additionally, integration expenses pertaining to TNT Express are pushing up costs. Such costs are expected to be $450 million in fiscal 2019.

Surrounded by these negativities, the company currently carries a Zacks Rank #4 (Sell). This bearish Zacks Rank makes it pretty clear that investors should discard the stock from their portfolio at the moment.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

Moreover, the Zacks Consensus Estimate for fiscal first-quarter earnings has been revised 0.8% downward over the past 30 days. The consensus mark for current-year earnings has also been moved slightly south over the past 60 days.

Key Picks

Some better-ranked stocks in the broader Transportation sector are GATX Corporation GATX, Trinity Industries, Inc. TRN and SkyWest, Inc SKYW. While GATX carries a Zacks Rank #2 (Buy), Trinity and SkyWest sport a Zacks Rank #1.

Shares of GATX, Trinity and SkyWest have soared more than 42%, 27% and 97%, respectively, in a year.

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FedEx Corporation (FDX) : Free Stock Analysis Report

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