Leading freight carrier,
) announced this Tuesday that it is repurchasing 32 million of
outstanding shares of its common stock in addition to its
remaining 7.4 million shares repurchase authorization. These
shares represent 10% of its 317 million shares outstanding.
The market responded favorably to this news and share price
increasing 2.7% from its opening on Tuesday. Since then, the
stock has been climbing.
Aside share buyback, in Jun 2013, FedEx also raised its
dividend payment by a penny to 15 cents. We believe that the
company's focus on increasing investor return is backed by its
strong financial strength from operational efficiency. Further,
to fortify investors' value the company is also aiming to enhance
its profitability though superior cost structure.
FedEx has set a 2016 end target of $1.6 billion in incremental
profit at FedEx Express and 2020 target of 30% improvement in
fuel efficiency of its fleet. Other than gaining $600 million in
cost savings through 2016 from the Voluntary regiment plan, the
company expects these profits to arise from infrastructural
developments like aircraft modernization, aircraft maintenance
processes, fuel consumption, as well as increased pick-up and
The company is also taking initiatives to reduce the
Trans-Pacific capacity with effect from Apr 1. FedEx is
aggressively working on plans to curb over-capacity from Asian
lanes to adjust traffic in lower yield networks. In this context,
it expects to remove some of its networks between the U.S. and
Asia in July. In fiscal 2014 and beyond, the company expects to
ramp up capital spending in the Ground segment in order to meet
the growing demand.
Based on higher demand assumption, FedEx anticipates a higher
return on invested capital (ROIC) from such spending. In the
Freight segment, management expects to further invest in
technology to upgrade network and equipment and automation
planning to enhance customer service levels in fiscal 2014.
We believe these initiatives will lead to greater operational
efficiencies, generating significant long-term synergies,
supporting international business growth and driving
profitability. These will also give the company advantage over
other players like
United Parcel Service, Inc.
Expeditors International of Washington Inc.
Radiant Logistics, Inc.
FedEx currently has a Zacks Rank #3 (Hold).
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