Why FedEx Shares Jumped 12% in June

Markets Motley Fool

What happened

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FedEx Corporation (NYSE: FDX) jumped roughly 12% in June, moving the stock above the trading range it had been stuck in for most of the year. It's now up around 17% for the year.

So what

The stock started to move higher early in the month, as industry watchers began to think more positively about FedEx following the Aircargo 2017 conference. For example, analysts David Ross and Bruce Chan of Stifel noted that they expect positive trends in the air cargo industry to last through the end of 2017. "With FedEx's fiscal year ending May 31 and its earnings release scheduled for June 20, we reviewed our model to see where we may have been too conservative given the continued strength of air freight" and express, they added.  

Investors who bid the shares up expecting positive results weren't disappointed, either. As the Fool's Adam Levine-Weinberg highlighted, FedEx's fiscal fourth-quarter results came in well above expectations. That positive news pushed the shares above the 10% gain mark as the month came to a close. Although some of the good news in the quarter stemmed from tax benefits, the quarter saw continued strength in the express business and a stabilization in FedEx's ground operations. So even if you pull out the tax benefit, it was still a pretty good quarter. The company also presented a pleasing view of the future in fiscal 2018.

Now what

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There are big long-term trends in the shipping industry about which investors need to think carefully before stepping in to buy FedEx shares. One quarter or fiscal year just isn't enough information.

For example, the rise of internet shopping has notably increased shipping demand. However, there are positives and negatives in that development. On the positive side, it looks as if FedEx can ride a secular change in consumer shopping habits. On the negative side, increasing demand means the shipper will need to spend more money to adjust to new market dynamics. And then there's the company-specific issue of integrating the acquisition of the European TNT Express business, which recently got hit by a global computer virus.

So right now, it appears investors are taking a positive view of the future at FedEx. And FedEx is putting up numbers that support that outlook. But you'll want to think carefully about the changes taking shape at FedEx and in its industry before jumping in here.

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Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends FedEx. The Motley Fool has a disclosure policy.