We maintain our Neutral recommendation on FedEx. The company
started fiscal 2015 on a strong note, beating both the top and the
bottom line in the first quarter. Quarterly adjusted earnings of
$2.10 per share steered ahead of the Zacks Consensus Estimate of
$1.95. Growth came primarily on the back of solid financial results
at FedEx Ground, volume and revenue growth at FedEx Freight and a
rise in U.S. domestic volume at FedEx Express. The company also
reaffirmed its encouraging guidance for fiscal 2015. However, the
effects of a sluggish economic environment have clouded the
near-term outlook of the company. Further, competitive threats,
legal hassles, unionized workforce and pension headwinds could
limit the upside potential of the stock, going ahead. Our target
price is $181.00 per share.
Based in Memphis, TN, FedEx Corporation is the leader in global
express delivery services. The company provides a broad portfolio
of transportation, e-commerce and business services through
companies competing collectively, operating independently and
managed collaboratively, under the FedEx brand. FedEx has four
major operating segments FedEx Express, FedEx Ground, FedEx Freight
and FedEx Services.
The FedEx Express segment (accounted for 60.7% of fiscal 2014
revenues) includes Federal Express Corporation, which is the
world's largest express transportation company, offering
time-specific delivery within one to three business days and
serving markets that comprise more than 90% of the world's gross
domestic product. The FedEx Express segment also includes FedEx
Trade Networks Inc., which provides international trade services,
specializing in customs brokerage and global ocean and air cargo
The FedEx Ground segment (23.6%) includes FedEx Ground Package
System Inc., which is a leading provider of small-package ground
delivery service. FedEx Ground provides low-cost, day-specific
service to every business address in the U.S. and Canada, as well
as residential delivery to nearly 100% of U.S. residences through
FedEx Home Delivery. The FedEx Ground segment also includes FedEx
SmartPost Inc., which specializes in the consolidation and delivery
of high volumes of low-weight, less time-sensitive
business-to-consumer packages using the U.S. Postal Service or
Canada Post Corporation for final delivery to any residential
address or PO Box in the U.S. and Canada.
The FedEx Freight segment (12.1%) includes FedEx Freight
Corporation, which is a leading U.S. provider of
less-than-truckload (LTL) freight services through its FedEx
Freight business (regional LTL freight services) and its FedEx
National LTL business (long-haul LTL freight services). The FedEx
Freight segment also includes FedEx Custom Critical Inc., North
America's largest time-specific, critical shipment carrier.
The FedEx Services segment (3.6%) includes FedEx Services, which
provides sales, marketing and information technology support to the
other companies FedEx TechConnect, which is responsible for
customer service, billing and collection of major business units in
the U.S. and FedEx Office, which provides an array of document and
business services as well as retail access to customers for the
package transportation businesses.
FedEx Corporation (FDX): Read the Full Research
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