There are two main reasons insiders buy shares in their own companies. They either believe that business is about to get better, or that the company is undervalued. Whatever the reason, insider buying tells us that those within the company expect the company’s share price to rise.
In this report, we are going to highlight some interesting insider buying at FedEx Corp (FDX:US). FedEx is an American multinational courier delivery services company. The world’s largest express transportation company, it operates in more than 220 countries, making around six million shipments every day. The company is listed on the New York Stock Exchange and currently has a market capitalization of $59 billion.
Insider Buying at FedEx Corp
Our data shows that since June 30, two insiders have purchased FedEx stock. Those who have bought shares include:
- Board member Amy Lane (607 shares @ $228.12 per share)
- Board member Jim Vena (900 shares @ $230.05 per share)
Combined, the two insiders have spent around $345,000 on FedEx stock.
What stands out here is that both insiders have increased the size of their positions significantly with these trades. Ms. Lane has increased her holding to 686 shares from 79 shares while Mr. Vena has increased his holding to 1,325 shares from 425 shares. The fact that the insiders have boosted the size of their positions substantially suggests that they are very confident the stock is undervalued right now.
It’s worth noting that Ms. Lane was formerly a Managing Director of the Global Retailing Investment Banking Group at Merrill Lynch & Co. She also served as a Managing Director at Salomon Brothers, where she founded and led the retail industry investment banking unit. Given her background, she is likely to have a good understanding of the stock’s intrinsic value.
New Strategy Paying Off
In late June, FedEx advised that it expects to grow adjusted profit by double digits between now and 2025, by focusing on higher-profit deliveries. The company, which has been under pressure from activist investor D.E. Shaw recently, said that it expects adjusted earnings per share (EPS) to grow at an average annualized growth rate of 14% to 19% between now and 2025, with revenue growing at between 4% and 6%.
So far, the strategy of focusing on revenue quality has paid off for FedEx. For the quarter ended May 31, the company reported an 8% year on year increase in revenue, despite delivering less packages.
“Our continued emphasis on revenue quality drove significant improvement in our fourth quarter results,” said CFO Michael Lenz. “We expect further momentum in fiscal 2023 and beyond as we execute on our initiatives to drive increased profitability and returns,” he added.
It’s worth noting that FedEx stock currently has a low valuation. At present, Wall Street analysts expect the group to generate earnings per share of $22.8 this financial year. That puts the stock on a forward-looking P/E ratio of about 10.
In light of the company’s new financial targets, and the stock’s low valuation, we see the insider buying here as a bullish indicator.