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FedEx (FDX) Loses 26% in a Year: What's Dragging it Down?

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Shares of FedEx Corporation FDX have fallen 26.4% against the industry 's 18.6 % decline in a year’s time. The below -par performance was caused by weakness in FedEx Express and coronavirus outbreak.

Let’s discuss the factors hurting the stock.

The coronavirus outbreak in China is a setback especially because the company has significant exposure in the country.  FedEx expects shipment delays due to travel restrictions following the virus outbreak, which will likely hurt its operational performance. Notably, its rival — United Parcel Service Inc UPS — has also issued a warning about operations being disrupted due to health hazard.

The company has a below-par track record with respect to earnings per share, beating the Zacks Consensus Estimate in three of the last four quarters. It reported better-than-expected earnings per share in the other quarter.  FedEx has trailing four-quarter negative earnings surprise of 2.98%, on average.

The dismal earnings performance was primarily caused by the slowdown in global economy, following the United States-China trade tensions, which has eased somewhat after the Phase 1 trade deal was signed in January. Due to the trade tensions, FedEx‘s primary revenue-generating segment, FedEx Express, performed dismally in the last few quarters, which will affect overall results.

Notably, FedEx slashed its fiscal 2020 earnings outlook in Dec 2019, due to expectations of lower revenues at each of the transportation segments and elevated costs stemming from expansion of the seven-day delivery service in the Ground unit.

Moreover, with FedEx investing significantly in facility upgrades, capital expenses have increased. Also, integration expenses pertaining to TNT Express are adding up costs. This is expected to hurt the bottom line going forward.

Negative Estimate Revisions and Zacks Rank

Investors’ pessimism revolving around the stock is evident from the Zacks Consensus Estimate for fiscal 2020 earnings being revised 10.4% downward in the past 90 days to $10.82.

FedEx carries a Zacks Rank #4 (Sell).

Stocks to Consider

Few better-ranked stocks in the Zacks Transportation sector are Frontline Ltd. FRO and Costamare Inc. CMRE , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Frontline and Costamare have rallied 15.4% and 23.4%, respectively, in a year.

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