) has announced the construction of a ground distribution
facility in Southwestern Illinois. The company expects the $23.5
million worth facility to serve the 10,000-package distribution
per hour upon its completion. We expect the new facility to add
to FedEx' already established infrastructure, thereby
strengthening its service capabilities.
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The new facility is expected to generate 25 full time jobs along
with 150 part-time jobs in the state of Illinois. The company
already has 16 operational facilitates in the state that cater to
package delivery services in the area and work in tandem to
support the economy of the state.
FedEx' other improvement plans include productivity enhancements
in the Ground segment like automation of planning and execution
of free load and pickup and delivery processes. The segment's
trailers are also expected to be equipped with GPS devices to
improve fleet management.
We believe near-term earnings growth will be aided by increasing
profitability in Freight coupled with continued growth in the
Ground segment. Additionally, improving international revenues
and operational efficiency in FedEx Express will also support
earnings going forward.
FedEx is boosting its international business through substantial
investments to enhance its existing routes and make strategic
acquisitions. The company is building a new hub in Guangzhou,
China, to cater to 100 new Chinese cities within the next five
years. Recently, the company announced that it will invest
$100 million in China in order to strengthen its position in the
country against its rival -
United Parcel Service, Inc.
As for acquisitions, in 2012, the company took over Polish
courier company Opek Sp. z o.o. as well as French B2B Express
transportation company, TATEX. Soon after, the company acquired
Rapidão Cometa, a Brazilian transportation and logistics company.
We believe the investments in organic growth as well as
acquisitions will lead to greater operational efficiencies,
providing a competitive edge, generating significant long-term
synergies, supporting international business growth, and driving
higher profitability. The company targets 46% of its capital
expenditure budget of $3.6 billion for fiscal 2013 (lower than
the previous estimate of $3.9%) to be directed toward growth
initiatives and 54% to be dedicated to the existing operations.
FedEx, which operates with the likes of
Air Transport Services Group, Inc.
Radiant Logistics, Inc.
) retains a Zacks Rank #3 (Hold).