FedEx Parent’s Stock Rises
The earnings report, released Dec. 17, fueled a stock buying frenzy, pushing FDX stock to a 52-week high of $84.50 a share on Dec. 21.
Between Dec. 11 and Dec. 18, FDX stock rose 14.7%, boosting the Transport Topics Trucking Stock Index, which tracks stock prices of 50 publicly owned trucking companies. Memphis, Tenn.-based FDX is the largest component (about 20%) of the TT index.
The TT index has rebounded sharply since it hit a low of 136.59 on Oct. 9. Over the nine weeks ended Dec. 18, the index was up 54.5%, or 74.41 points, and was within 14 points of the 225.69 high reached in mid-April.
Contingency costs associated with recent contract negotiations with FedEx’s pilot’s union were not included in the second-quarter results. FDX said these costs, including contracts for supplemental airlift and ground transportation, are estimated to range from $110 million to $120 million and will adversely affect earnings during the second half of fiscal year 1999.
According to Steve Lewins, an analyst with Gruntal & Co., investors are jumping on the FDX bandwagon, in part, because they believe FedEx will cash in on the trend of selling products on the Internet.
But Mr. Lewins isn’t convinced. The Internet will account for only about 1% of retail sales this year, he said, and there are many competitors, including the U.S. Postal Service, poised to handle the
raffic.
“It’s a replay of the catalog company scenario. They demanded low prices, and FedEx kicked them out.”
FedEx also may have problems in its international business if Europe slows down, Mr. Lewins said.
For the full story, see the Dec. 28 print edition of Transport Topics. Subscribe today.
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