On Jan 24, 2013, we upgraded
) to Neutral from Underperform. The upgrade rests on strong
growth prospects with an upward movement in pricing, a
diminishing expense base, profitable alliances and investment
These positives were offset by the lingering effects of the
Eurozone crisis, heavy pension liabilities, competitive pressures
and regulatory issues that will likely dampen the near-term
Why the Upgrade?
In the coming days, we expect FedEx to register strong earnings
momentum and growth through long-term expansion opportunities. In
Nov 2012, the company increased its shipping rates by 4.9% for
FedEx Ground and FedEx Home Delivery shipments.
The company also raised shipping rates by 3.9% for FedEx
Express, covering U.S. domestic, U.S. export and import services.
These initiatives will substantially enhance the company's
earning power over the next several quarters.
Global express delivery services provider, FedEx, has set a
target of $1.7 billion in incremental profit to be achieved by
the end of 2016 based on cost improvements. The company aims to
spread its services across the U.S., Canada and Mexico and
capitalize on potential business opportunities in NAFTA (North
American Free Trade agreement) markets.
Further, FedEx is boosting its international business by heavy
investments to enhance the existing routes and make strategic
acquisitions. The company has allocated 46% of its capital
expenditure budget of $3.9 billion for fiscal 2013 for growth
initiatives and 54% for the existing operations.
However, for the third quarter of 2013 - expected to be reported
on Mar 20 - the Zacks Consensus Estimate for earnings is $1.39
per share, reflecting a year-over-year decline of 10.6%.
Other Stocks to Consider
Other stocks in the Air Delivery & Freight Services sector
that are currently performing well include
SK Telecom Co. Ltd.
) that has a Zacks Rank #1 (Strong Buy),
Ryder System Inc.
Air Transport Services Group Inc.
). Both Ryder and Air Transport Services hold a Zacks Rank #2
AIR TRANSPT SVC (ATSG): Free Stock Analysis
FEDEX CORP (FDX): Free Stock Analysis Report
RYDER SYS (R): Free Stock Analysis Report
SK TELECOM CO (SKM): Free Stock Analysis
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