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How FedEx’s combative year has hurt its stock performance

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Frederick Smith, chairman and chief executive officer of FedEx Corp., speaks during the U.S. Chamber of Commerce Aviation Summit in Washington, D.C., on Thursday, March 7, 2019.

Anna Moneymaker | Bloomberg | Getty Images

FedEx has had a combative year.

Founder and CEO Fred Smith’s dispute with the New York Times over a report about 2018 taxes is just the latest public battle in 2019 that has helped shave more than 31% off its stock price over the last 12 months.

A mishandling of Huawei packages, a breakup with Amazon and lawsuit against the Trump administration have all made headlines and the stock move in sometimes unexpected ways.

Year to date, FedEx’s stock is down 5.6% through Wednesday’s closing price of $152.27 per share. That’s far below rival UPS and the S&P 500, which have gained more than 21% and 24%, respectively. The company declined to comment.

Here is look at FedEx’s controversial year:

Huawei

FedEx said June 1 that it “diverted” two packages addressed to Huawei in Asia and accidentally routed them to the United States. FedEx called it an error, but the Chinese telecom company and the Chinese government suspected it was related to the Trump administration’s trade war with China and launched their own investigation.

Huawei has been a focal point in the U.S. trade war since the Commerce Department put it and 70 other Chinese companies on its “blacklist” in May. The Pentagon previously halted sales of Huawei and ZTE mobile phones and modems on military bases around the world due to potential security risks.

FedEx issued a statement June 1, saying “Our relationship with Huawei Technologies Co. Ltd. and our relationships with all of our customers in China are important to us.” The Chinese government threatened to place FedEx on its version of the U.S. Blacklist, but in the end the company did not face any sanctions.

The result: FedEx’s stock rose 2.4% over the next week but still underperformed the broader market. The S&P 500 gained 4.4% over the same period. A month after the controversy, FedEx gained 6.1%, again underperforming the S&P 500, which rose 7.7%.

Amazon contract

FedEx announced June 7 that it wasn’t going to renew its Express contract with Amazon, calling it a “strategic decision” that would allow the company to focus on other e-commerce customers. FedEx said Amazon only represented around 1.3% of its revenue and in August also ended the ground contract with the e-commerce giant.

However, during the FedEx earnings call in September, the company admitted the loss of Amazon had a greater than anticipated impact on margins.

The result: One week after the high profile breakup, FedEx shares rose 4.9%, far outperforming the broader market with the S&P 500 gaining 1.53%. A month after the Amazon split, Fed shares were 3.68% higher, but below the broader market with the S&P 500 gaining 5.17%.

Commerce Department lawsuit

FedEx filed a lawsuit June 24 against the U.S. Commerce Department saying it faced an “impossible burden” from regulations mandating shippers screen packages for national security threats before they enter the US.

Smith said the lawsuit was unrelated to Huawei, adding that it was about reducing the company’s exposure to potential penalties. However the lawsuit came just weeks after the FedEx’s delivery errors involving Huawei.

The result: A week after the lawsuit, FedEx shares fell 0.7%, slight below the lower market that fell 0.29%. A month later, FedEx stock was 6.45% higher far outperforming the S &P 500 that gained 2.34%.

New York Times spat

CEO Smith challenged the New York Times publisher to a debate on Nov. 17 over an article that said FedEx paid $0 in taxes in 2018, thanks to the Trump tax cut, but didn’t spend more on equipment and other investments as Smith said it would. The company fired back, calling the article a “deliberate distortion” and accusing the New York Times of reducing its CapEx spending after seeing its taxes decrease.

The result: Week to date, FedEx shares have fallen 1.83% while the broader market has been flat, the S&P 500 down 0.01%.



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