Important points
CNBC’s Jim Cramer said Wednesday that the recent exits of FedEx Corp. and the newly independent FedEx Freight create an attractive buying opportunity. “In either case, I think you can buy the stock right here, right now,” the “Mad Money” host said. FedEx stock is down about 10% from its June 15th high, while FedEx Freight has experienced an even steeper 27% drop from its June 9th high. Kramer’s Charitable Trust, a portfolio managed by CNBC’s investment club, owns stock in both FedEx and FedEx Freight. Kramer believes there is plenty of upside for both, and the trust has kept its share price up through the downturn. FedEx Freight was spun off from its former parent company on June 1st. FedEx Freight provides less than truckload delivery services for businesses. This consists of deliveries that are too large for regular parcel deliveries, but not so large that they require an entire trailer. The rest of FedEx handles things like delivering packages that bring trucks into residential areas. Cramer blamed FedEx’s decline on investors who misread the delivery giant’s latest earnings report, which he called a “great performance” with “pretty significant improvements in top line and bottom line.” He said investors are focusing too much on FedEx’s operating margins, which are in line with expectations, and argued that the company’s fuel surcharge increases increased revenue without generating additional profits, making the margins look low. “What’s wrong with that? Nothing,” he said. Cramer also dismissed concerns about FedEx’s full-year outlook, saying the company’s move to a calendar-year reporting schedule following the FedEx Freight spinoff will likely cause confusion over Wall Street’s expectations. He said the selloff was overdone given FedEx’s long history of issuing conservative guidance. “I’m not concerned about anything that investors seemed to take issue with when FedEx reported last month,” he said. “We still think this company is in a great position because overall demand is strong and our cost initiatives are very good.” Kramer said FedEx Freight’s weakness reflects a common pattern after spinoffs, as some shareholders who received their shares simply chose to sell. “FedEx Freight is being criticized because this is what always happens right after a breakup of this kind,” he said. Mr. Kramer said the company’s first earnings report as an independent company was unusual, but better than the market had predicted. Both sales and operating profit exceeded expectations, but profit margins faced the impact of fuel surcharges that weighed on FedEx’s results. But his investment thesis goes far beyond the company’s first quarter as a standalone business. “I want to own this for the long term,” Kramer said, arguing that FedEx Freight’s position as the largest player in North America’s sub-truckload market and its dedicated management team should allow it to benefit as the freight industry recovers from a multi-year recession. “The bottom line is this: FedEx and FedEx Freight have fallen over the past few weeks, but I view these declines as buying opportunities,” he said. Subscribe to CNBC Investing Club today to follow Jim Cramer’s every move in the markets. Questions about Cramer’s disclaimer? Call Cramer: 1-800-743-CNBC Want a deeper look into Cramer’s world? Punch him! Mad Money Twitter – Jim Cramer Twitter – Facebook – Instagram Have questions, comments, or suggestions about the Mad Money website? madcap@cnbc.com
