One of the leading freight forwarding companies,
) has announced the sale of $2 billion senior notes and expects
to buyback shares worth $2 billion with the initial repurchase of
11.4 million shares. The company expects the bond sale to
facilitate its new share buyback program.
Apart from offering debt to support investor return, FedEx has
been opting for strategies that result in inorganic growth. The
company has been implementing higher shipping rates, which remain
imperative to revenue growth. Last year, the company provided
rate hikes for 2014, including a 3.9% hike in shipping rates at
FedEx Express for U.S. export and import services, effective Jan
6, 2014. We expect these initiatives to substantially better the
company's earnings power over the next several years.
Further, the company is also banking on new business wins. In
Sep 2013, FedEx won a $171 million contract from the U.S.
Department of Defense for small package delivery services for the
military. This contract expires on Sep 30, 2014. FedEx also won a
second defense contract worth $49.8 million for overpacking and
transportation of perishable products for the Defense Commissary
Agency and Defense Logistics Agency, effective Oct 1, 2013.
Unless extended, the contract will expire on Sep 30, 2014.
Based on the positive factors, we expect FedEx to register
earnings momentum, long-term expansion opportunities and
advantages over other freight carriers like
United Parcel Service, Inc.
Radiant Logistics, Inc.
Atlas Air Worldwide Holdings Inc.
FedEx currently has a Zacks Rank #3 (Hold).
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