Should you buy FedEx shares on the recent weakness?

FedEx Corporation (NYSE: FDX) ended more than 20% down on Friday after the logistics company issued a “concerning” guidance for the future.

Still, Michael Farr (President and CEO of Farr, Miller & Washington LLC) would rather add to his position in “FDX” than bail on it.

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FedEx shares are inexpensive to own

At its current price-to-earnings multiple of close to twelve, Farr dubs the multinational conglomerate reasonably inexpensive to own. On CNBC’s “Halftime Report”, he said:

If I take their estimates for 2023 down 35% to 40%, that has the stock trading at 12 times earnings today. They’ve got $7.0 billion in cash, debt to EBITDA is less than three times. It’s not an expensive stock at these levels.

Last night, FedEx reported disappointing preliminary results for its fiscal Q1 and said things will get even worse moving forward. The Memphis-headquartered firm, however, left its $1.50 billion stock buyback programme unchanged.

FedEx management lost some credibility

Investors were particularly aggressive in their response to the announcement as it came entirely out of the blue. In June, CEO Raj Subramaniam was very bullish for the next few years (source).

Farr did warn, therefore, that he’d rather pull out of FedEx if he eventually loses confidence in the management.

It might be a 70% macro problem but there’s still a 30% company problem. I’m probably closer to adding to it, but if I begin to be convinced that the CEO or Management is the problem, I’ll bail.

FedEx shares are now down close to 40% for the year.