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FedEx Corporation (FDX): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

By: Zacks.com
Posted: 1/10/2014 7:00:00 AM
Referenced Stocks: FDX;LTL

Summary:
We maintain our Neutral recommendation on FedEx. The company started fiscal 2015 on a strong note, beating both the top and the bottom line in the first quarter. Quarterly adjusted earnings of $2.10 per share steered ahead of the Zacks Consensus Estimate of $1.95. Growth came primarily on the back of solid financial results at FedEx Ground, volume and revenue growth at FedEx Freight and a rise in U.S. domestic volume at FedEx Express. The company also reaffirmed its encouraging guidance for fiscal 2015. However, the effects of a sluggish economic environment have clouded the near-term outlook of the company. Further, competitive threats, legal hassles, unionized workforce and pension headwinds could limit the upside potential of the stock, going ahead. Our target price is $181.00 per share.

Overview:

Based in Memphis, TN, FedEx Corporation is the leader in global express delivery services. The company provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the FedEx brand. FedEx has four major operating segments FedEx Express, FedEx Ground, FedEx Freight and FedEx Services.

The FedEx Express segment (accounted for 60.7% of fiscal 2014 revenues) includes Federal Express Corporation, which is the world's largest express transportation company, offering time-specific delivery within one to three business days and serving markets that comprise more than 90% of the world's gross domestic product. The FedEx Express segment also includes FedEx Trade Networks Inc., which provides international trade services, specializing in customs brokerage and global ocean and air cargo distribution.

The FedEx Ground segment (23.6%) includes FedEx Ground Package System Inc., which is a leading provider of small-package ground delivery service. FedEx Ground provides low-cost, day-specific service to every business address in the U.S. and Canada, as well as residential delivery to nearly 100% of U.S. residences through FedEx Home Delivery. The FedEx Ground segment also includes FedEx SmartPost Inc., which specializes in the consolidation and delivery of high volumes of low-weight, less time-sensitive business-to-consumer packages using the U.S. Postal Service or Canada Post Corporation for final delivery to any residential address or PO Box in the U.S. and Canada.

The FedEx Freight segment (12.1%) includes FedEx Freight Corporation, which is a leading U.S. provider of less-than-truckload (LTL) freight services through its FedEx Freight business (regional LTL freight services) and its FedEx National LTL business (long-haul LTL freight services). The FedEx Freight segment also includes FedEx Custom Critical Inc., North America's largest time-specific, critical shipment carrier.

The FedEx Services segment (3.6%) includes FedEx Services, which provides sales, marketing and information technology support to the other companies FedEx TechConnect, which is responsible for customer service, billing and collection of major business units in the U.S. and FedEx Office, which provides an array of document and business services as well as retail access to customers for the package transportation businesses.


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