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FedEx Can Keep Up with the Competition

March 22, 2014 | About:
tyokunbo

tyokunbo

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FedEx Corporation (FDX) provides customers with a portfolio of transportation, e-commerce, and business solutions. With annual revenues of $45 billion, the company operates in four segments. They are FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services. The company provides business applications through its segments. FedEx consistently ranks among the world’s most admired employers, with more than 300,000 team members. It was founded in 1971 and is headquartered in Memphis, Tennessee.

Numbers at a Glance
In the last quarter, FedEx reported revenues of $11.3 billion, up 3% from $11.0 billion in the same period of the year prior. Its operating income was $641 million, up 9% from $589 million on a year-on-year basis. The company’s operating margin was 5.7%, up from 5.4% in the same period of the year prior. FedEx’s net income was $378 million, up 5% from last year’s $361 million. The company entered into accelerated agreements to repurchase an aggregate of $2.0 billion of the company’s common stock.

Positive Outlook
FedEx expects earnings to be $2.25 to $2.50 per diluted share in the next quarter. It also expects earnings to be $6.55 to $6.80 per diluted share for fiscal 2014. Share repurchases are expected to continue at the company’s discretion. The capital spending forecast for fiscal 2014 is $3.8 billion, down $200 million from the previous forecast.

Initiatives
In fiscal 2013, FedEx embarked on a profit improvement program. It was to make its staff function more efficiently. It was also aimed to modernize the company’s fleet and transform its U.S. domestic network. In addition, the program wants to improve the company’s international profits as well as optimize its network.

FedEx also helped drive significant increases in international domestic revenues through acquisitions in Brazil, Poland, Mexico, and India. The company opened dozens of European facilities to improve the density of its European network.

Competition
The express package and freight sectors are very competitive. The ability to compete effectively depends on a company’s rivals. FedEx faces competition principally from United Parcel Service (UPS) and Amazon (AMZN). Many of FedEx’s other rivals in the international market are government-controlled companies. Despite the tough competition, FedEx has a competitive advantage. It is expanding its solutions for customers through a more efficient business model.

Wings Across the World
FedEx’s international profit improvement program is meant to build the company’s efficiency and lower costs. It is also to expand the company’s portfolio through new offerings. Apart from the acquisitions, FedEx has launched services in China and other Asian countries. FedEx has also opened new offices in Latin America and Europe.

China at a Glance
One of FedEx’s fastest growing markets is the Asia-Pacific region, in particular China. FedEx launched a domestic general delivery service for inter-province deliveries to reach major cities in China. Also, Chinese authorities recently granted FedEx permission to begin operating express-shipping services in eight Chinese cities. FedEx already provides such services in more than 400 Chinese cities. However, these operations are run through joint ventures with Chinese firms.

A Look at the Americas
Though FedEx faced headwinds in the region, it continued to evolve strategies designed at achieving a revenue growth. It has completed the acquisition of Rapidão Cometa, one of the largest transportation and logistics companies in Brazil. It has also completed the acquisition of Servicios Nacionales Mupa, S.A. de C.V., which strengthens its network in Mexico. FedEx has opened new offices and expanded its alliances with regional service providers. FedEx also launched new freight forwarding service options.

Conclusion
FedEx has been in the business for over forty years, so it is well-positioned to meet challenges in the express package and freight sectors. Other remarkable advantages are its willingness to innovate and invest in ventures for a greater shareholder value in the future. FedEx’s accelerated stock repurchase program, together with its strong financial position, makes me feel bullish about the company.


Rating: 2.5/5 (2 votes)

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Comments

Dr. Paul Price
Dr. Paul Price premium member - 5 months ago

But what are FDX shares worth? And why?

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