Group 1 - The market is currently favoring expensive stocks, with the S&P 500 trading at a forward PE of 25.5, indicating a preference for higher valuations [2] - This high valuation is not representative of most stocks, suggesting a divergence in market performance [2] Group 2 - iREIT+HOYA Capital focuses on income-producing asset classes, aiming for sustainable portfolio income, diversification, and inflation hedging [1]

Group 1 - The market is currently favoring expensive stocks, with the S&P 500 trading at a forward PE of 25.5, indicating a preference for higher valuation stocks [2] - It is noted that the high valuation of the S&P 500 does not represent the majority of stocks in the market, suggesting a divergence in stock performance [2] Group 2 - iREIT+HOYA Capital focuses on income-producing asset classes that provide sustainable portfolio income, diversification, and inflation hedging [1]

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Skip to Main Content Industrials Post Positive Earnings. 3 Stocks Whose Charts Say 'Buy.' By Doug Busch Share Resize Reprints In this article DE XLI GNRC ULS Industrial earnings season is off to a promising start, with J.B. ...

Core Viewpoint - United Parcel Service, Inc. (UPS) is currently viewed unfavorably by analysts due to concerns over its high dividend yield of 7.76%, which may indicate potential financial instability in the event of an economic slowdown [1] Company Overview - UPS provides a range of services including package and freight delivery through express, ground, and international shipping, as well as logistics, customs brokerage, distribution, and specialized healthcare supply chain solutions [1] Dividend Concerns - The high dividend yield of 7.76% is seen as a red flag, raising concerns that a significant economic slowdown could lead to a dividend cut [1] Competitive Landscape - UPS operates in a duopoly with FedEx, which is considered a trusted brand in the logistics industry [1] Investment Alternatives - While UPS has potential as an investment, certain AI stocks are suggested to offer greater upside potential and lower downside risk, particularly in the context of current market trends [1]

Core Viewpoint - FedEx Corporation (NYSE: FDX) has shown resilience despite a challenging macroeconomic environment, leading to a buy rating initiated in late July due to significant valuation opportunities [1] Company Summary - The stock of FedEx has been positively impacted since the buy rating was issued, indicating investor confidence in the company's performance [1] Analyst Background - The analyst has a strong focus on the tech sector and holds a Bachelor of Commerce Degree with Distinction, majoring in Finance, which supports the credibility of the analysis [1]

Core Insights - FedEx Corporation (FDX) and Westinghouse Air Brake Technologies Corporation (WAB) have both announced dividend increases this year, demonstrating a commitment to shareholder returns despite economic uncertainties [1][10]. Dividend Increases - Wabtec's board approved a 25% dividend hike, raising its quarterly cash dividend to $0.25 per share ($1.00 annualized) from $0.20 ($0.80 annualized) [3]. - FedEx's board approved a dividend increase, raising its quarterly cash dividend to $1.45 per share ($5.80 annualized) from $1.38 ($5.52 annualized) [3]. Price Performance Comparison - WAB has achieved a 2.4% year-to-date gain, while FDX has experienced a double-digit decline [5]. - FDX's poor performance is attributed to revenue weakness due to geopolitical uncertainty and high inflation affecting consumer sentiment and growth expectations [8]. - WAB's strength is linked to its focus on new technologies, restructuring actions, and cost-cutting initiatives [9]. Earnings Estimates - The Zacks Consensus Estimate for WAB's 2025 and 2026 sales indicates year-over-year increases of 6.7% and 5.8%, respectively, with EPS estimates trending upward [13]. - The Zacks Consensus Estimate for FDX's current year sales implies a 4.4% year-over-year increase, but EPS estimates have been trending downward [14]. Valuation Comparison - WAB is trading at a forward sales multiple of 2.85, above its 5-year median of 2.07, indicating a higher valuation [15]. - FDX has a forward sales multiple of 0.58, below its 5-year median of 0.69, and carries a Value Score of A, while WAB has a Value Score of D [15]. Conclusion - WAB's better price performance and upward earnings estimate revisions suggest a stronger position compared to FDX, which is currently ranked lower [17][18].

Core Insights - FedEx is implementing a company-wide cost realignment initiative called DRIVE, which has resulted in significant savings of $1.8 billion in fiscal 2024 and an additional $2.2 billion in fiscal 2025 [1][10] - The company anticipates $1 billion in transformation-related savings in fiscal 2026 from the DRIVE program and Network 2.0 due to ongoing geopolitical uncertainties and high inflation affecting consumer sentiment and growth expectations [2][10] Cost Reduction Initiatives - FedEx is reducing flight frequencies, parking aircraft, and cutting staff as part of its cost reduction strategy, including layoffs of 611 employees at two distribution centers in Memphis, TN [3][10] - The company reported better-than-expected earnings per share and revenues for the first quarter of fiscal 2026, primarily driven by these cost-cutting initiatives [4] Competitive Landscape - United Parcel Service (UPS) is also cutting costs in response to weak demand, offering buyouts to delivery drivers and trimming its workforce [5] - UPS has agreed to reduce business with Amazon, its largest customer, by more than 50% by June 2026, which has influenced its workforce reduction decisions [6] Financial Performance and Valuation - FedEx shares have gained over 6% in the past six months, outperforming its industry [7] - The company trades at a 12-month forward price-to-earnings ratio of 11.92X, which is considered expensive compared to industrial levels [11] - The Zacks Consensus Estimate for FedEx's earnings has been revised downwards over the past 60 days for fiscal second-quarter, third-quarter, and full-year 2026 and 2027 [12][13]

Core Insights - FedEx Corporation (FDX) is currently viewed as an attractive investment opportunity due to its low valuation, with a forward price-to-sales (P/S) ratio of 0.61X, which is below the Zacks Transportation—Air Freight and Cargo industry average, the S&P 500, and its competitor United Parcel Service (UPS) [1] Financial Performance - FedEx reported better-than-expected earnings per share and revenues for Q1 of fiscal 2026, driven by cost-cutting measures and strong domestic delivery performance [5] - The company faced a $150 million headwind from the global trade environment and a $130 million headwind from the expiration of a contract with the U.S. Postal Service, yet domestic average daily volumes increased by 5% [7] - Total freight revenues declined by 8% year-over-year, with U.S. freight revenues dropping significantly by 47% [8] - FedEx anticipates revenue growth of 4-6% year-over-year for fiscal 2026, with adjusted earnings per share projected between $17.2 and $19 [8] Stock Performance - Despite the earnings beat, FedEx shares have declined in double digits year-to-date, underperforming compared to GXO Logistics, which has gained over 25% this year [12] - Over the past year, FedEx shares have decreased by 10%, while UPS and GXO Logistics have seen declines of 35.1% and 6.2%, respectively [15] Shareholder Initiatives - FedEx has raised its quarterly dividend by 5.1% to $1.45 per share and repurchased $3 billion worth of shares in fiscal 2025, returning a total of $4.3 billion to shareholders through dividends and buybacks [16] Challenges Ahead - The company is facing challenges such as weak international package volumes and economic uncertainty due to tariffs, with expectations of a $1 billion headwind in fiscal 2026 [17]

Core Viewpoint - There are three distinct economies currently: a booming AI economy, a struggling real economy, and a speculative economy that resembles the dot-com bubble [3][13][14]. AI Economy - The AI sector, particularly in data centers, has been a significant driver of market performance, contributing to 75% of S&P 500 returns, 80% of earnings growth, and 90% of capital spending growth since the launch of ChatGPT in late 2022 [3][9]. - Major companies in the AI space, such as Meta, Alphabet, Amazon, and Nvidia, have substantial financial resources, allowing them to invest heavily in AI despite criticisms [5][6]. - The comparison of the current AI boom to the dot-com bubble is deemed inappropriate, as most AI-related companies are generating real earnings and revenue, unlike many dot-coms that failed [9][10][14]. Real Economy - The real economy is showing signs of weakness, with hiring slowing down and freight activity declining, indicating potential future economic challenges [11][12]. - Key indicators such as retail sales, housing market activity, and industrial numbers are also showing signs of a slowdown [12][20]. - Despite challenges, small and medium-sized businesses are performing relatively well, and banks continue to lend with solid credit metrics [13][20]. Speculative Economy - The speculative economy is characterized by companies with little to no earnings that are heavily reliant on retail investor interest, reminiscent of the late 1990s dot-com era [13][15]. - Recent equity offerings from speculative companies, such as Quantum Computing and Joby Aviation, highlight the volatility and potential overvaluation in this sector [16][17]. - There is concern that the speculative stocks could drag down the broader market if they do not stabilize, as institutional investors may be hesitant to invest without significant discounts [17][21]. Conclusion - The AI sector is viewed as a legitimate growth area, while the speculative stocks are seen as the real bubbles in the market that need to be addressed [22][24].

Company Summary - JP Morgan downgraded FedEx shares to neutral, citing weakness in its freight division which may challenge its full-year EPS guidance and impact the upcoming spin-off of FedEx Freight in June [1] - FedEx is underperforming compared to the broader transport market, reflecting a trend seen across major trucking companies, including XPO and Old Dominion, due to a freight recession affecting the entire sector [2][3] - Analysts noted that recent channel checks indicate that while price discipline in the industry is maintained, it is under pressure, which could affect multiples until volume conditions improve [3] Industry Overview - The freight market is currently experiencing contraction, particularly in the manufacturing sector, which is a significant source of high-margin freight [4] - The ISM index has remained below 50 for most of the year, indicating a contraction in manufacturing, compounded by tariffs affecting CEO confidence [5] - Increased capacity in the trucking sector is putting downward pressure on pricing, with orders for new tractor trailers rising significantly year-over-year and month-over-month as companies prepare for new truck tariffs effective November 1 [5][6] Competitive Landscape - FedEx faces heightened competition in the parcel business, particularly from smaller players entering the market, which is impacting its market share against UPS [7][8] - The ongoing tariff situation on heavy trucks and rising costs associated with cardboard are additional factors influencing the competitive dynamics in the freight and parcel sectors [8]