FedEx Rides the Gold Rush to Fortune

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The share price of FedEx (NYSE:FDX) gained 6.16% to $148.95 following higher than expected fourth quarter earnings, winning by following in the footsteps of successful companies like Levi Strauss who were ready to supply a need when a new demand was created.

Back in 1849, thousands of men from all over the world rushed to make their fortune in California after gold was discovered at Sutter’s Mill in the foothills of the Sierra Nevada. Most of them ended up broke. But people like Levi Strauss knew that the fortune to be made “in them there hills” was not in finding gold. It was in selling supplies to the myriads of miners who kept coming in droves.

When FedEx was established it was already fulfilling a need for efficient parcel delivery. It filled that vacuum quite successfully, and has continued to do so. The rise of technology has not only benefited FedEx by creating efficiency opportunities, it has also expanded their delivery volume as a result of increased online ordering by consumers, thus requiring delivery of items that would heretofore have been picked up at POS locations. The total revenue generated by delivery of online purchases is projected to expand by 15% to $300 billion this year alone.

  • Fedex Ground business revenue increased by 8% to $3.01 billion in the fourth quarter. Its ground service represents 25% of its overall revenue stream.
  • FedEx Express service increased slightly to $7 billion while operating income increase by 3% to $475 million
  • FedEx Freight returned $1.55 billion, up 12% year-on-year, and operating income increased by a phenomenal 51% to $122 million.
Full Year Results
Given that this was the last report for the FedEx’ fiscal year, the full year highlights included:
  1. $45.6 billion in revenue (2013: $44.3 billion)
  2. $3.45 billion in operating income (2013: $2.55 billion)
  3. $2.10 billion in net income (2013: $1.56 billion)
  4. An operating margin of 7.6% (2013: 5.8%)

FedEx CEO, Alan B. Graf, Jr., prognosticated that “With continued modest economic improvement, our results in fiscal 2015 should benefit from base performance improvement and ongoing execution of our profit improvement initiatives at FedEx Express, continued profitable growth at FedEx Ground and FedEx Freight, and our share repurchase program. We remain committed to improving earnings, cash flows, returns on invested capital and returns to share owners, with the most recent example of the latter being our announced 33% increase in the quarterly dividend.”

The $149.95 FedEx share price at close today was barely off its new intra-day high of 149.37, reached just 16 minutes before the closing bell. FDX has been trading between 139.21 and 149.00 for almost a month. The company’s market capitalization is currently at $44.02 billion and it generates $275,588 per employee. Over $31 billion of its sales come from within the U.S.

That’s all I have to say for now. Catch you down the road.


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