FedEx Is Rising with the Economy's Prospects

Look for FedEx's 2010 revenue to increase about 1-3%, followed by a 6-10% rise in 2011. And the aforementioned metrics represent good enough news to keep institutional investors (IIs) piling into FDX. FDX's ground operations will gain volume from the departure of competitor DHL, while its freight business should record a 3-5% decline in 2010. Meanwhile, FedEx's ability to implement an across-the-board 5.9% rate increase remains an open question.

The key variable in FDX's revenue obviously concerns the U.S. recovery: volume increases will drive international revenue growth, and the second half of 2010 should convince those remaining, reluctant investors that the U.S. recovery is not a fluke (Investors are already bullish on the global economic recovery).

The First Call FY2010/FY2011 EPS estimates for FDX are $3.74 to $5.05. The 2010 EPS estimate looks about 5% low; the 2011 estimate, about 10% low, according to my analysis.

Technically, FedEx's stock chart is strong -- an uptrend, but one that features above-average volatility. Don't buy FDX if you can't tolerate a 10-15% stock price drop in a month -- it could happen. Fed Ex has also broken through resistance at $90 and a recent pull-back represents a good time to scoop-up shares.

2010 Outlook: I view FedEx as a long-term play, but if investors are looking to sell FDX within the year, it's probably best to take your profits after it rises to $98-99, if it fails to rise above $100.

Stock Analysis: I consider FedEx Corp to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, and I liked the stock enough to buy it, I'd consider buying a 25% position in FDX now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my FDX position before June 2010 and I'd put a sell/stop loss at: $51.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.