FedEx Express, a subsidiary of
FedEx Corp.
(
FDX
) is expanding its "International First" early delivery service to
eight new countries. Given the latest addition, FedEx International
First early delivery service will be now available in Australia,
Austria, Brazil, Canada, Denmark, Japan, Luxembourg and Mexico.
This international early delivery is a time bound service
specifically targeted towards morning door-to-door express
deliveries. It includes custom clearance and delivery commitment of
1-3 days. So long, the service was available in only 11
countries.
FedEx is boosting its international business through heavy
investments to enhance existing routes and make strategic expansion
via organic growth as well as acquisitions. The expansion of
FedEx' International First service into eight new markets signifies
its focus on improving international revenues and operational
efficiency at FedEx Express to support earnings going forward.
The Express segment remains challenged by subdued revenue
performance by U.S. domestic package. Apart from the sluggish
economy that has weakened market demand, factors like global sales
mix shift from priority to deferred shipments also remain
detrimental.
Further, demand shift by customers from Express to Ground
deliveries to reduce shipping cost also contribute adversely to the
company's Express segment. In such a scenario, looking for greener
pasture by expanding internationally underpins the company's
efforts for generating higher income from this segment. For
fiscal 2013, the company previously projected Express revenues to
increase on the back of international services and yields to
improve across all services as it focuses on various yield
management programs.
However, we fear that the global economic environment impacted
by the European debt crisis, and a slump in Asian growth will
remain detrimental to demand growth. In addition, FedEx faces stiff
competition from peers like
United Parcel Service, Inc.
(
UPS
).
Currently, FedEx retains a Zacks #3 Rank (short-term Hold
recommendation). We also reiterate our long-term Neutral rating on
the stock.
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