At 52-Week Highs, Will FedEx & UPS Continue to Rally in 2018?

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At 52-Week Highs, Will FedEx & UPS Continue to Rally in 2018? - Zacks

The biggest overhaul in U.S. tax code in 30 years has been a boon for package delivery giants like FedEx Corp. and United Parcel Service. The $1.5 trillion package, converted into law (Tax Cut and Jobs Act) on Dec 22, reduces corporate taxes from 35% to 21%. The significant reduction in corporate tax rate is likely to aid the above-mentioned companies. We note that the effective tax rate at FedEx was 35.4% in the first half of fiscal 2018.

Riding on this momentum, shares of FedEx and UPS that dominate and define the Zacks Air Freight and Cargo Industry, hit their respective 52-week high levels on Jan 3, 2018. While FedEx shares scaled a 52-week high of $261.57 during the trading session, the UPS stock touched its highest point of $126.69.

Apart from the significant drop in corporate tax rate, the new law allows these companies to deduct their capital expenditures from taxable income in the year of their occurrence, which was not allowed earlier. This aspect hugely favors companies like FedEx and UPS as they invest substantially toward capital expenditure.
 
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