Sometimes you have to take the price breaks they give you, if you are going to go into the stocks that are going to have bright futures in 2018.
That's what I think people will be doing with the stock of FedEx Corp. (FDX) this morning.
FedEx is one of those companies that is directly regarded as a tremendous play on global trade -- as it should be. I would put it on par with Boeing (BA) and Caterpillar (CAT) . The difference though? Boeing's stock is up 62% and Caterpillar's has advanced 34%, while FedEx is up only half as much as the latter.
Why is that?
The hack.
The hack, which was massive, involved state-sponsored cyberterrorism, and unlike, say Equifax (EFX) , this company went above and beyond to flag every aspect of the disaster, which had a very huge impact on earnings.
How huge?
I think it managed to obscure a lot of the progress FedEx made with TNT -- the European business it picked up at what now looks like the trough of economic activity, for $4.8 billion in 2016.
Now the hack is behind them -- and what is in front of the company? How about huge price increases in many lines of shipping that there is no doubt will stick? How about a major expansion in the way you can drop off packages, including a hook-up with 8,000 Walgreens (WBA) outlets to use as a FedEx retail depot. How about major limits on some sizes of packages that should make the holiday season far more lucrative?
And, most important, how about a globally robust economy that includes more e-commerce from brick-and-mortar retailers than ever before, with expansion as far as the eye can see?
Now, I think the hack is initially going to cause some turbulence in the stock trading. Of course, it has to, given that it does lead to a substantial number cut.
But that number cut is behind the company and it reaffirmed guidance ex-the attack -- which is, to me, what matters.
I know it sounds like "but other than that how was the play, Mrs. Lincoln?" but the fact is this company is doing incredibly well and it is the logical play on worldwide growth. That's why I think that if it can earn say, $15 next calendar year -- a distinct possibility -- you could see a 50-point gain on this stock once the hack smoke clears, which I think will be pretty darned soon.
What really attracts me to this one, besides the price break, however momentary it might be?
Two things. First there is a comment from Rajesh Subramaniam, one of the execs on the call. And I quote: "We are seeing the best year for global trade in years." He goes on later in the call to say, "This is the fastest freight growth I have seen since 2011. The trade growth is 1.4x GDP for the first half of this calendar year, and it's typically been roughly GDP for the last few years. So what's driving it? The manufacturing, especially in the technology sector, is the key driver of this trend for the year."
Second, the revered chairman, CEO and founder gave an unbelievable long-term outlook for the company, based on the wealth effect. It's having a major worldwide impact on growth, which has put "e-commerce on steroids."
Anything that grows with e-com is in the wheelhouse of FedEx -- and with it growing on steroids globally, what can I say? Take the price break this stock will give you, because I sense it might be the last one, barring an exogenous event, for a very long time.
(Bruce Kamich also discusses FedEx's technicals on Real Money today. Click here to read.)
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