Is FedEx a Healthy Stock for Your Portfolio?
T = Trends for a Stock’s Movement
FedEx provides transportation, e-commerce, and business services in the United States and internationally. Transportation is improving, so businesses and consumers are increasing their interest in transacting worldwide. Gasoline prices and vehicle efficiency tend to have a significant impact on the company, so watch for improvements in these areas. As boundaries on international commerce blur, look for companies like FedEx to be able to provide the shipping services required across the globe.
Shipping giant FedEx has been indicted by the U.S. Department of Justice for delivering drugs for illegal online pharmacies. FedEx denies the charges, which could carry a fine of more than $1.6 billion. The case is the government’s latest attempt to hamper questionable online businesses by cutting off access to critical yet more established parts of their supply chains. In the case of online pharmacies, the Justice Department is going after major shipping companies that deliver illicit drugs. To hurt some online lenders, the department has prosecuted banks that process their transactions. In both instances, the Justice Department says suppliers aren’t innocent bystanders but instead that some know their customers aren’t aboveboard and continue serving them anyway.
In the FedEx case, Bloomberg News reports: “The company knew it was delivering drugs to dealers and addicts, with couriers in Kentucky, Tennessee and Virginia expressing concerns circulated to senior managers that FedEx trucks were stopped on the road by online pharmacy customers demanding packages of pills, according to the indictment. Some delivery addresses were parking lots or vacant homes, prosecutors said. … FedEx continued to do business with one Internet pharmacy whose manager had been arrested for violating drug laws.” The approach echoes the government’s attempts to quash unscrupulous online lenders. The Justice Department is pursing what it calls Operation Choke Point, which became public last year.
From The New York Times in January: “In the first action under Operation Choke Point, Justice Department officials brought a lawsuit this month against Four Oaks Bank of Four Oaks, N.C., accusing the bank of being ‘deliberately ignorant’ that it was processing payments on behalf of unscrupulous merchants—including payday lenders and a Ponzi scheme. As a result, prosecutors say, the bank enabled the companies to illegally withdraw more than $2.4 billion from the checking accounts of customers across the country … Some senior bank executives brushed off warning signs of fraud while collecting hundreds of thousands of dollars in fees … The bank has reached a tentative $1.2 million settlement with federal prosecutors.” The financial industry has fought back fiercely. Lenders say the crackdown forces banks to refuse serving legitimate providers. Banks say they’re a neutral intermediary and that prosecutors, not banks, should be responsible for policing customers. FedEx has responded similarly.
Bloomberg News reports: “The company vowed to fight the charges, saying it can’t be responsible for the contents of the 10 million packages it transports daily and that policing customers would violate their privacy.”