Robert W. Baird & Co. Analyst Benjamin Hartford says FedEx Corporation (FDX) is one of the transportation stocks he’s currently recommending. He believes the company is in the midst of a transition.
“FedEx has outperformed the market over the past two years into improving margins within its core Express business,” he says. “It’s also been very shrewd as it relates to managing its capital over the past two years. It bought back stock aggressively while the share price was relatively low.”
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Hartford says FedEx has tapered share buybacks and instead reinvested in its business by acquiring businesses that have helped expand the product portfolio. He says the company’s model is one that is transitioning from a cyclical recovery in margins to a period in which its opportunity is more structural in nature.
“If successful with this transition, we see both elements — improved capital returns and free cash flow generation — as supporting continued outperformance of the stock,” Hartford says.
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