In retrospect, the trend was fairly obvious. During the pandemic, with billions of people stuck in their houses or simply leaving home less often, e-commerce picked up, asserts Richard Moroney, editor of Dow Theory Forecasts.

Enter FedEx (FDX), with its more than 79,000 trucks and nearly 700 planes, the world’s largest cargo-only air fleet.

In fiscal 2021 ended May, international markets remained somewhat sluggish. But FedEx set delivery records in the U.S., with average U.S. Express domestic package volume of 3.3 million, up from 2.9 million in 2019. Ground volumes reached 12.3 million a day, up from 9.0 million just two years earlier.

We expect troubles with the supply chain to gradually sort themselves out in coming quarters. The consensus projects per-share-profit growth of 38% in the February and May quarters combined, followed by 11% in fiscal 2023 and 9% in 2024. All of these estimates have risen over the last two months.

Considering its prospects, FedEx seems fairly cheap, earning a Quadrix Value score of 87. FedEx trades at 13 times trailing earnings, 19% below the median for airfreight stocks and 43% below its own three-year average valuation.

Analysts project long-term annual profit growth of 14% for FedEx. Factor in a P/E of 11 based on current-year profit targets, And FedEx’s price/earnings-to-growth (PEG) ratio of 0.8 reflects a 27% discount to the industry.

After holding the dividend steady for four years, FedEx raised the payout an impressive 15% in June. The current indicated yield is 1.3%. FedEx’s dividend history doesn’t offer much confidence regarding future growth.

But since the dividend gobbles up just 8% of operating cash flow, FedEx has the ability to keep that payout rising. We rate FedEx a Long-Term Buy.

Subscribe to Dow Theory Forecasts here…