Should You Buy FedEx on the Dip?

Last week, logistics giant FedEx (NYSE:FDX) reported its latest quarterly results. The company said a "constrained labor market" led to a $450-million increase in expenses due to inefficiencies across the network and an increase in wages, among other items. Although the company's revenue topped $22 billion (for the period ending Aug. 31) and rose 14% year over year, its net income of $1.11 billion was down 11% from the $1.25 billion it reported in the prior-year period.

The company's struggles are likely to continue, with its Chief Financial Officer Michael C. Lenz stating that "While we expect these conditions to continue near-term, we expect a gradual improvement in labor availability combined with our proactive revenue management actions to mitigate the ongoing impact of these headwinds on our results and position us for earnings growth in fiscal 2022."

At less than $230 a share, the stock hit new 52-week lows last week – a far cry from the more than $300 it was trading at as recently as May.

However, despite many brokerages lowering their price targets for the stock in light of the disappointing performance, many still see shares of FedEx climbing back to over $300. If that happens, that would be a return of at least 30%.

FedEx pays a modest yield of 1.3% which is right in line with the S&P 500 average. With online platforms and marketplaces continuing to do well, the demand for logistics likely isn't going anywhere. FedEx may be coming off a tough quarter but there's still a lot to like about the business over the long haul.