FedEx Delivers Record Share Price

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The thing that makes FedEx (NYSE:FDX) so good is that it delivers – in more ways than one. It’s worldwide reputation for delivering the goods is almost incomparable. But its commitment is, not the efficient shipment of packages, it is “producing superior financial returns for its shareowners by providing high value-added logistics, transportation, and related business services through focused operating companies that compete collectively, operate independently, and manage collaboratively.” That is the fundamental reason tat the FedEx share price is up another 3.17% today to a record 159.57. Another reason is the company’s first quarters earnings report that proves that FedEx’ commitment is working.

A Noteworthy Report

This morning’s report began as it should, reporting a 37% increase in EPS, up from $1.53 to $2.10 for the same period in 2013. Other key components of the report included:

  • a 6% increase in revenue from $11.0 billion to $11.7 billion year-on-year
  • a 24% increase in operating income from $795 million to $987 million year-on-year
  • an increase of 1.3 basis points in operating margins from 7.2% to 8.5% year-on-year
  • a 24% increase in net income from $489 million to $606 million year-on-year

Earnings were benefited by $0.15 per share from a buyback of 5.3 million shares of common stock. Still, this $0.15 represents only 26% of the overall increase in EPS.

All three of the company’s business segments delivered increases in revenue and operating income:

  • FedEx Ground
    • an 8% increase in revenue from $2.73 billion to $2.96 billion
    • a 13% increase in operating income from $483 million to $545 million
  • FedEx Express
    • a 4% increase in revenue from $6.61 billion to $6.86 billion
    • a 35% increase in operating income from $273 million to $369 million
  • FedEx Freight
    • a 13% increase in revenue from $1.42 billion to $1.61 billion
    • a 70% increase in operating income from $99 million to $168 million

Executive VP and CFO, Alan B. Graf, Jr., affirmed that “Our profit improvement programs are progressing as planned and we continue to expect strong earnings growth this year.

Other Noteworthy Items

The company has announced an across-the-board 4.9% price increase on its services that will take effect on 05 January 2015. This is a brilliant, and somewhat counter-intuitive move. Aside from the fact that it demonstrates bold and confident leadership, the amount of advance notice allows time for competitors to follow suit. They would be idiots not to do so.

Analysts at Citi are calling FedEx “better positioned,” at least going into the holiday season than UPS (NYSE:UPS), because FedEx has demonstrated the effectiveness of its operations in advance of the season, whilst UPS is still focused on improving theirs in preparation for it.

A projected EPS of $8.50 to $9.00 is still being affirmed by FedEx for its shareholders.

The FedEx share price has significantly outperformed both the S&P and the Dow over the past 52-week period, delivering a 40% increase compared to 10% by the Dow and 17% by the S&P. On 17 September, FedEx was trading at 110.68

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