We recently compiled a list of the 7 Best Warehouse Stocks To Buy According to Analysts. In this article, we are going to take a look at where FedEx Corporation (NYSE:FDX) stands against the other warehouse stocks.
The Global Warehousing Industry at a Glance
According to a report by IMARC, the global warehousing and storage industry was valued at $505.1 billion in 2023 and is expected to grow to $700.2 billion by 2032, at a compound annual growth rate of 3.5% between 2024 and 2032.
On a regional level, Asia Pacific currently dominates the global market. India’s booming warehousing and logistics sector has been witnessing a strong momentum. As reported by the real estate research and brokerage firm Colliers India, the sector recorded $2.5 billion in inflows in Q2. The industrial and warehousing sector accounted for 61% of total investments with $1.5 billion. As compared to Q2 2023, the institutional investments in the industrial and warehousing segment surged 11 times. The rapidly growing e-commerce and retail consumption in the country are expected to drive the demand for AI-enabled warehouses and micro-fulfillment centers in the next quarters.
Global giants have also looked to expand into India’s warehousing market in an attempt to diversify their supply chains beyond China and leverage the national economic boom and growth potential over the next 15 to 20 years. However, India lags in the warehousing stock with estimates from Avendus Capital stating that China has three times more than India’s 412 million square feet of Grade A warehouses meanwhile the US has 13 billion square feet of warehousing stock.
In light of the current events taking place in the US, a surprising sector that could potentially benefit from the ongoing port strikes is warehousing. This is the event of the first such shutdown in almost 50 years with tens of thousands of dockworkers going on strike indefinitely at ports across much of the country. As analyzed by CNBC’s Diana Olick, warehouses will see more demand and higher pricing power as tenants need workarounds for their goods and containers. An example of this case is the cold storage warehouse firms such as those storing food inventory which are expected to experience increased demand in the case of import disruptions. Warehouse REITs such as Prologis are providing storage areas to temporarily store inventory. However, this is only a short-term win since ports closing for the long term will be a loss for all including warehouses with no goods coming in or out of them. Since the warehouse construction has been low and occupancy rates on warehouses are currently high, the higher pricing power is only valid for the short term.
Our Methodology:
In order to compile a list of the 7 best warehouse stocks to buy according to analysts, we first sifted through ETFs and online rankings to gather a preliminary list of 25 such stocks. We then selected the top 7 stocks that had the highest upside potential, according to Wall Street analysts. The best warehouse stocks to buy according to analysts are arranged in ascending order of their average upside potential, as of October 3.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A driver unloading packages from a van for a time-critical delivery.
FedEx Corporation (NYSE:FDX)
Average Upside Potential: 18.01%
Number of Hedge Fund Holders: 59
FedEx Corporation (NYSE:FDX) is an American multinational conglomerate holding company that offers transportation, e-commerce, and business services, with a reach spanning more than 220 countries and territories. The firm has evolved from a single express service in 1973 to a global leader over the years.
The aforementioned broad portfolio of services allows FedEx to meet the needs of its customers, most of whom use services from two or more of its operating companies. FedEx Corporation (NYSE:FDX) has global logistics solutions to help optimize the supply chain. With over 40 million square feet of warehouse space, over 130 warehouse and distribution centers, as well as over 30 omni-channel and fulfillment facilities, FedEx has a lot to offer in terms of warehousing, distribution, and forward logistics.
The fiscal 2025 first quarter remained challenging as the firm made a foundational change to its internal structure to improve efficiency and reduce costs. The demand environment was also a challenge, particularly in U.S. domestic package market. FedEx reported earnings of $3.60 per share on revenue of $21.6 billion, which fell short of analysts’ expectations.
In the fourth quarter of 2023, the company moved into the era one FedEx, a consolidation plan to bring FedEx Ground and FedEx Services into Federal Express Corporation, a single company operating a unified, fully integrated air-ground express network under the FedEx brand. This was complemented by the rollout of Network 2.0, designed to optimize surface operations across the U.S. and Canada. The firm’s DRIVE program also remains on track to deliver $4 billion of savings compared to the fiscal 2023 baseline.
With a robust strategy to deliver long-term profitable growth through reducing costs and building on synergies between services, investors can potentially consider FedEx Corporation (NYSE:FDX). As of October 3, the stock has an average upside potential of 18.01%.
Overall FDX ranks 3rd on our list of the best warehouse stocks to buy according to analysts. While we acknowledge the potential of FDX as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than FDX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.