FedEx Becomes A Bargain

| About: FedEx Corporation (FDX)

At an estimated opening price of $85/share, Federal Express (NYSE:FDX) is approaching bargain levels.

A PE of about 13.5 compares favorably with the rest of the market, especially with arch-rival UPS (NYSE:UPS), which has been bid up to 18. FDX also offers a small dividend, which is not threatened at all by its negative earnings call. The company's looking to be 10-20 cents per share lighter on earnings for the current quarter than earlier projections indicated.

There is an assumption in current pricing that FedEx is more threatened by an economic slowdown than UPS, but that's not entirely true. FedEx has its own ground operation, just like UPS, and its Kinko's stores represent just as much of a retail presence as the UPS stores. FedEx grew up on document delivery, a market circling the drain, but it has long been growing in packages, and valuable packages can be lightweight.

Analysts are blaming selling pressure for FDX on its strength in Europe and Asia. Europe is in a banker-driven recession that will continue until creditors are convinced to write-down some loans and that money is replaced in a negotiated way. Asia's slowdown is in sympathy with both Europe and the America's economic slowdown.

But all these events point to looser money, as bankers work to stimulate economies as America's economy was stimulated in 2009. Growth, in short, will return. And Federal Express will be in a great position to take advantage of that growth.

The most important growth industries of our time, such as pharmaceuticals and computing, require constant shipments of small samples under tight control. This is FedEx' meat. It actually has a better network for growth right now than UPS does, in my view, so it should be priced more in line with UPS.

It's the class deliveries that will get the most growth in a global economy where intellectual property is king.

This indicates FDX earnings will go higher, not lower, once the economic skies start to clear. Once you see a technical bottom in the stock, anywhere from the current price to $80, it's time to jump in.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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