), a leading U.S. package delivery company, is expanding its
services across U.S., Canada and Mexico. The company aims to tap
a potential business opportunity in NAFTA (North American Free
Trade agreement) markets through its expansion plans.
The company is expanding its Priority next-day services in its
FedEx Freight segment by opening a new service centre in
Rochester, New York. The new service centre will cater to 13 U.S.
and Canadian markets dealing in cross border shipments to and
from Toronto and Montreal.
In Mexico, the company added two new service centers - one
each in Culiacán and Silao. By introducing these two centers,
FedEx would strengthen its freight network in northwestern and
north central part of Mexico. Further, in its Freight segment,
management intends to invest in technology to upgrade network and
equipment and automation planning in order to enhance customer
FedEx' other improvement plans include productivity
enhancements in the Ground segment like automation of the
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, for catering to100 new Chinese cities within
the next five years. Recently, the company announced to
invest $100 million in China in order to strengthen its
competitive position in the Chinese markets against its rival -
United Parcel Service, Inc.
As for acquisitions, the company completed the take over of
Polish courier Company Opek Sp. z o.o. in June this year and
French B2B Express transportation company, TATEX in
Following this, 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
The stock currently has a Zacks #3 Rank, implying a short-term
Hold rating. For the long-term, we have an Underperform
recommendation on FedEx.
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