Is FedEx an Excellent Dividend Stock to Buy Right Now? | FDX Stock Analysis
Summary
Parkev analyzes FedEx's recent performance, noting a 13% revenue growth and strategic shifts toward a more efficient operational model. Parkev highlights that the management has reduced fleet size by 8% and divested the FedEx Freight business to allow for independent operations. These moves aim to improve operating profitability toward a 10% target, up from the current 7%.
Parkev expresses concern regarding the company's return on invested capital (ROIC), which has historically been low and barely exceeds the cost of capital. While Parkev acknowledges the shift toward a more asset-light model and the capping of capital expenditures at 4% of revenue, the stock's recent price surge has made it less attractive. Parkev's discounted cash flow analysis suggests a fair value of $313, which is below the current market price.
Mentioned Stocks
Reasoning: Parkev downgrades the stock because the current market price of over $331 exceeds Parkev's fair value estimate of $313 per share. Parkev notes that while the company is successfully right-sizing operations and reducing capital intensity to 4% of revenue, the historical return on invested capital has been poor. Additionally, Parkev points out that the forward P/E of 15.9 is near the highest end of the stock's recent valuation range.