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1. Company Snapshot

1.a. Company Description

FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally.The company's FedEx Express segment offers express transportation, small-package ground delivery, and freight transportation services; time-critical transportation services; and cross-border enablement, technology, and e-commerce transportation solutions.Its FedEx Ground segment provides day-certain delivery services to businesses and residences.


The company's FedEx Freight segment offers less-than-truckload freight transportation services.As of May 31, 2022, this segment had approximately 30,000 vehicles and 400 service centers.Its FedEx Services segment provides sales, marketing, information technology, communications, customer service, technical support, billing and collection, and back-office support services.


The company's Corporate, Other and Eliminations segment offers integrated supply chain management solutions, specialty transportation, customs brokerage, and global ocean and air freight forwarding services; and document and business services, as well as retail access to its customers for its package transportation businesses.FedEx Corporation was founded in 1971 and is based in Memphis, Tennessee.

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1.b. Last Insights on FDX

FedEx's recent performance was driven by its strong quarterly results, with adjusted earnings per share of $3.83, surpassing analyst estimates. The company's cost-cutting efforts and operational efficiency have bolstered its prospects. Additionally, its Freight spinoff, tech investments, and efficiency drives are promising. Bank of America raised its price target on FedEx to $285, citing a positive meeting with management. The company's focus on fleet modernization and shareholder value through buybacks, with Bailard Inc. growing its holdings by 120.5%, also supports its growth.

1.c. Company Highlights

2. FedEx Delivers Solid Q1 Results Amidst Headwinds

FedEx reported a strong first quarter, with revenue growing 3% year-over-year to beat expectations. Adjusted earnings per share were $3.83, a 6% increase year-over-year, surpassing the estimated $3.61. The company's adjusted operating income grew 7%, driven by strength in U.S. domestic package services, resulting in 20 basis points of adjusted margin expansion. The revenue growth was fueled by a 7% increase in adjusted operating income, with Federal Express Corporation (FEC) seeing a 17% increase in adjusted operating income and a 70 basis point expansion in adjusted operating margin.

Publication Date: Sep -20

📋 Highlights
  • Strong Domestic Performance: U.S. domestic package services drove 7% adjusted operating income growth and 20 bps margin expansion, with mid-single-digit ADV growth in SMB and healthcare.
  • EPS Outperformance: Adjusted EPS of $3.83 (+6% YoY) exceeded midpoint expectations despite $160M headwind from postal contract expiration and $1B from global trade challenges.
  • Network 2.0 Progress: 360 optimized stations in North America processed 3M daily volumes, with 18% of U.S. ADV now flowing through the transformed network.
  • Freight Challenges: FedEx Freight saw $70M adjusted operating income decline and 250 bps margin contraction, but expects margin recovery in H2 2026 post-market improvement.

Segment Performance

FedEx Express, the company's largest segment, drove the positive results, with higher yields, cost reduction efforts, and increased U.S. domestic package volume contributing to the margin expansion. In contrast, FedEx Freight faced challenges in the LTL sector environment, resulting in a $70 million decline in adjusted operating income and a 250 basis point contraction in adjusted operating margin. However, the company is well-positioned for margin expansion when the market improves.

Strategic Priorities

FedEx remains focused on its strategic priorities, including its Tricolor strategy, Network2.0 initiative, and leveraging data and technology to enhance customer experiences. The Tricolor strategy continues to drive growth in international priority and economy freight, with revenue per pound up 9%. The Network2.0 initiative is progressing well, with 360 optimized stations in the U.S. and Canada, enabling 3 million average daily volume flowing through optimized operations.

Outlook and Valuation

FedEx expects full-year adjusted earnings per share to be in the range of $17.20 to $19, with revenue growth of 4% to 6%. The company's valuation metrics, including a P/E Ratio of 13.66 and an EV/EBITDA of 6.52, indicate a reasonable valuation. With a strong balance sheet and a commitment to returning capital to shareholders, FedEx is well-positioned for continued success. The spinoff of FedEx Freight is progressing as planned, with a target separation date of June 2026.

Growth Prospects

The company's focus on strategic, profitable growth, coupled with ongoing operational efficiency initiatives, positions FedEx for continued success in the year ahead. Analysts estimate next year's revenue growth at 4.0%, indicating a stable outlook. With a dividend yield of 2.44% and a free cash flow yield of 6.68%, FedEx offers an attractive return profile for investors.

3. NewsRoom

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FedEx (FDX) Outperforms Broader Market: What You Need to Know

Dec -04

Source:

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FedEx Stock Battling Seasonality Ahead of Earnings

Dec -03

Source: schaeffersresearch.com

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FedEx and UPS Face Plane Groundings at the Worst Possible Time

Dec -03

Source: 247wallst.com

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Why Fast-paced Mover FedEx (FDX) Is a Great Choice for Value Investors

Dec -03

Source: zacks.com

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Arrowstreet Capital Limited Partnership Has $180.82 Million Position in FedEx Corporation $FDX

Dec -03

Source: defenseworld.net

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Boston Family Office LLC Lowers Stake in FedEx Corporation $FDX

Dec -02

Source: defenseworld.net

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FedEx Corporation $FDX Shares Purchased by Brandes Investment Partners LP

Dec -02

Source: defenseworld.net

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Clarkston Capital Partners LLC Lowers Position in FedEx Corporation $FDX

Nov -28

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.28%)

6. Segments

FedEx Express (Including TNT Express)

Expected Growth: 8.3%

Fast and secure delivery of high-value and time-sensitive shipments drives growth, fueled by increasing demand for express logistics, particularly in e-commerce and the need for reliable international shipping solutions.

Fedex Ground

Expected Growth: 4.5%

FedEx Corporation's growth is driven by increasing e-commerce demand, expansion in emerging markets, and strategic investments in digital transformation and logistics infrastructure.

FedEx Freight

Expected Growth: 4.5%

FedEx Freight's growth is driven by increasing e-commerce demand, expansion of its freight forwarding services, and strategic pricing strategies to maintain market share in the competitive LTL carrier market.

Corporate, Other, and Eliminations

Expected Growth: 4.5%

FedEx's consolidated corporate overhead, other revenue and eliminations segment is driven by growth in e-commerce, increasing demand for logistics services, and strategic cost management initiatives.

FedEx Services

Expected Growth: 8.2%

FedEx's logistics, and transportation services will drive growth, fueled by increasing global trade, demand for e-commerce, strategic acquisitions, and investments in digitalization and infrastructure.

7. Detailed Products

FedEx Express

Time-sensitive, door-to-door delivery of packages and freight, with a focus on speed and reliability.

FedEx Ground

Cost-effective, day-definite delivery of packages and freight, with a focus on reliability and efficiency.

FedEx Freight

Less-than-truckload (LTL) and truckload (TL) freight services for large shipments, with a focus on reliability and flexibility.

FedEx Office

Retail and printing services, including copying, printing, and shipping, with a focus on convenience and flexibility.

FedEx Supply Chain

Customized logistics and supply chain management services, with a focus on efficiency and visibility.

FedEx Trade Networks

International air and ocean freight forwarding services, with a focus on customs clearance and compliance.

FedEx Services

Customized logistics and transportation services, including warehousing and distribution, with a focus on flexibility and scalability.

8. FedEx Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

FedEx has a moderate threat of substitutes due to the presence of alternative logistics and transportation companies, but its strong brand reputation and extensive network mitigate this threat.

Bargaining Power Of Customers

FedEx has a low bargaining power of customers due to its large customer base and diversified revenue streams, making it less dependent on individual customers.

Bargaining Power Of Suppliers

FedEx has a moderate bargaining power of suppliers due to its dependence on fuel suppliers and aircraft manufacturers, but its large scale of operations and long-term contracts mitigate this threat.

Threat Of New Entrants

FedEx has a low threat of new entrants due to the high barriers to entry in the logistics and transportation industry, including significant capital requirements and regulatory hurdles.

Intensity Of Rivalry

FedEx operates in a highly competitive industry with intense rivalry among established players, including UPS, DHL, and Amazon, which drives innovation and cost-cutting efforts.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 59.50%
Debt Cost 3.95%
Equity Weight 40.50%
Equity Cost 10.13%
WACC 6.45%
Leverage 146.93%

11. Quality Control: FedEx Corporation passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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TransDigm Group

A-Score: 6.4/10

Value: 3.0

Growth: 7.9

Quality: 6.7

Yield: 9.0

Momentum: 4.0

Volatility: 8.0

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PACCAR

A-Score: 6.0/10

Value: 3.7

Growth: 6.7

Quality: 6.1

Yield: 8.0

Momentum: 3.0

Volatility: 8.3

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Paychex

A-Score: 5.8/10

Value: 1.8

Growth: 5.8

Quality: 9.0

Yield: 6.0

Momentum: 3.0

Volatility: 9.3

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Caterpillar

A-Score: 5.6/10

Value: 2.0

Growth: 7.0

Quality: 7.0

Yield: 3.0

Momentum: 7.5

Volatility: 7.3

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UPS

A-Score: 5.2/10

Value: 5.0

Growth: 4.2

Quality: 4.9

Yield: 9.0

Momentum: 1.0

Volatility: 7.3

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FedEx

A-Score: 5.1/10

Value: 5.7

Growth: 5.7

Quality: 4.4

Yield: 4.0

Momentum: 3.5

Volatility: 7.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

274.4$

Current Price

274.4$

Potential

-0.00%

Expected Cash-Flows