Tags: FedEx | CEO | bullish | FDX

FedEx CEO Very Bullish on Global Shipper’s Prospects

By    |   Monday, 16 Jul 2012 11:53 AM

FedEx (FDX) management is very bullish on its own outlook, despite the slowing global economy. CEO Fred Smith said as much in a recent call with analysts, predicting continued good numbers from the freight behemoth. Analysts don’t disagree and believe that the shipper is ready to gain ground with an eventual economic recovery.

FedEx provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the FedEx brand.

These companies are included in four business segments: FedEx Express, FedEx Ground, FedEx Freight, and FedEx Corporate Services.

FedEx Express is the world’s largest express transportation company, offering time-certain delivery within one to three business days and serving markets that comprise more than 90 percent of the world’s gross domestic product.

FedEx Ground provides low-cost, day-certain service to every business address in the United States and Canada, as well as residential delivery to nearly 100 percent of U.S. residences through its FedEx Home Delivery service.

FedEx Freight is a U.S. provider of less-than-truckload (LTL) freight services. FedEx Corporate Services provides the other FedEx companies with sales, marketing and information technology support. The FedEx Services segment also includes FedEx TechConnect, which is responsible for customer service, billings and collections for our U.S. customers and offers technical support services, and FedEx Office and Print Services, which provides an array of document and business services and retail access to FedEx Express and FedEx Ground services.

FedEx Chairman and CEO Fred Smith was very clear about the company’s prospects in a recent earnings call.

“Let me cut to the chase about FY '13,” Smith told analysts. “We again are stating to you unequivocally we believe we will continue to improve earnings, margins, returns on invested capital and cash flows, and I would add that the earnings guidance that (FedEx CFO) Alan (Graf) will talk with you about does not include the effects of significant cost reduction programs currently under review that we believe should be announced in the fall.”

FedEx has a market cap of $29.12 billion in a sector, air freight and logistics, where the average company size is $1.93 billion. Its trailing 12-month P/E ratio is 14.41 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.02, compared to 1.44 for the sector.

Its projected earnings per share growth for the coming year is 15.92 percent, compared to a sector average of 14.96 percent.

Improvement


Wall Street is bullish on FDX, with buy or outperform calls from Raymond James, Citigroup Investment Research, UBS, Standard & Poor’s Equity Research, Deutsche Bank and Merrill Lynch.

“While the U.S. and global economies remain weak, we expect to see improvement over the next 12 months. We believe an improving U.S. and global economy would lead to increased volumes across FDX's entire network,” S&P analysts wrote June 22.

“This would drive improved capacity utilization and likely margin expansion in FY 13. We believe the shares will benefit from increased investor interest in logistics stocks on concrete signs of economic improvement.”

FedEx next reports on Sept. 18.

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