- Recent quarterly earnings for FedEx were lower than expected.
- The effect of trade tariffs has not yet been felt.
- Most analysts consider FedEx stock a buy.
Package delivery giants FedEx (FDX) and UPS (UPS) are often watched by investors as indicators of the health of the U.S. economy and global trade. President Trump’s recent tariffs and the reactions by other countries have investors looking more closely than ever.
FedEx announced its fiscal first quarter results on Sept. 17, 2018, and the company missed analysts’ expectations. The reasons given for the miss were employee compensation — including $200 million of compensation it accelerated after the passage of Trump’s U.S. Tax Cuts and Jobs Act — and other expenses. Investors were concerned enough to shave 2.7 percent of the stock’s price in after-hours trading.
Click to read about how new $16 billion Trump tariffs mean everything could cost more.
Companies Brace for More Tariffs as China and the US Retaliate
Trade between the U.S. and China represents about 2 percent of total revenue for FedEx, Reuters reported. The tariffs that have been implemented affect less than 10 percent of volume, according to FedEx Chief Marketing and Communications Officer Rajesh Subramaniam.
The small decline in FedEx stock certainly isn’t cause for alarm, but the lion’s share of the tariffs have not yet been implemented. A previous round of tariffs affected $50 billion worth of products brought into the U.S. from China. On Sept. 17, Trump announced a 10 percent tariff on an additional $200 billion in Chinese goods, which will take effect Sept. 24.
Trump has indicated that if China retaliates against this round of tariffs, he will add approximately $267 billion in Chinese products to the list of things that will be subject to tariffs when they are brought into the U.S. The Chinese government has indicated that further retaliation is possible.
Monitor Your Investments During the Trade War
Generally, the trade war with China seems to have had little to no negative effect on the stock market. After Trump announced the new tariffs on Sept. 17, the Dow Jones Industrial Average gained over 180 points the next day.
Analysts don’t seem worried about FedEx, either. Of the 27 analysts that follow the company, 22 of them rate the stock a strong buy or a buy. Five analysts rate it a hold. The average price target is $287.08, compared with its Sept. 17 close of $241.58.
The economic impact of Trump’s tariffs has yet to be fully felt, so there doesn’t seem to be any reason to adjust your investments in shipping companies right now or to avoid investing in them now if you haven’t yet. But as tariffs escalate, international shipping, supply chains and manufacturing could increasingly be impacted, which might make you want to take another look at your portfolio.
Click to keep reading about 10 times tariffs didn’t work.
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