FedEx Corporation (FDX): Company Profile
FedEx Corporation (FDX): Company Profile
Monday, January 8th, 2024
Ticker Symbol: FDX
FedEx Corporation’s Origins
FedEx Corporation, commonly referred to as FedEx, was incorporated in Delaware in 1997; however, the company itself has been around for many decades before that.
The FedEx Corporation serves as a holding company for the various companies under the FedEx umbrella, most of which have the FedEx name in it.
FedEx went public in 1978 and recently celebrated 50 years of business in 2023. To date, the company has its principal offices in Memphis, Tennessee, where it began its operations in 1973.
The company’s primary objective is to deliver packages and freight rapidly and reliably to countries and territories around the globe.
In its 2023 annual report, FedEx states that its technology, air routes, transportation infrastructure, and network make it the world’s largest express transportation company.
The company offers a variety of transportation, business, and e-commerce services, often complementing one another to assist a wide range of customers.
As of the end of May 2023, the company employed more than 500,000 employees, owned about 700 aircraft, and had about 82,000 vehicles in its network.
As far as freight service centers, retail locations, air and ground hubs, and local stations, the company had about 5,000 by the end of May 2023.
Why has FedEx been so successful?
FedEx, simply put, has seen much success in the package and freight transportation industry because it’s ALL IN.
From the start of the process till the very end, FedEx uses technology and energy-efficient methods to ensure that deliveries are completed on time.
To provide further detail, FedEx offers businesses and consumers locations to drop off packages, then transports the packages, and finally, FedEx delivers the packages.
While this may sound normal, many express delivery companies only provide 1 or 2 of these services. FedEx has proven it is a one-stop shop for individuals and businesses looking to move a package or freight.
Energy-efficient vehicles and aircraft help it reduce the cost customers and businesses pay, and, in terms of technology, FedEx is continuously investing in it.
The technology FedEx invests in helps employees ensure that the correct packages are collected and delivered to avoid errors, as much as possible, of course.
Its technology helps the company in vastly different ways, for example, for drivers, it utilizes real-time data to help drivers take the most optimal routes when dropping off packages.
Another contributing factor to its success is its marketing. The company’s marketing is top-tier, a similar factor many of the most successful companies around the globe have.
FedEx markets its services in the UEFA Champions League, one of the biggest soccer leagues in the world, many of the PGA events (golf), and is even a sponsor for the NFL.
These marketing efforts help bring awareness to the company and its services, adding to its top line.
How does FedEx earn its revenue?
FedEx currently has 4 reportable segments. Those segments are FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services.
FedEx Express offers express transportation to more than 220 countries and territories, according to the company’s 2023 annual report.
FedEx Ground specializes in delivering small packages throughout the U.S. and Canada. The company, in its 2023 annual report, states that it delivers to any business and residence within the U.S.
FedEx Freight is a provider of less-than-truckload freight transportation and delivers to many parts of the U.S. and various points in the U.S. Virgin Islands and Puerto Rico.
FedEx Services includes a few operating segments, two of these segments being FedEx Office (offers business and retail services) and FedEx Logistics (customs and global ocean and air freight).
Each segment generates revenue for the company in its specific area of expertise. As the company introduces new services or acquires new companies, it eventually falls into one of these segments.
Let’s look at revenue!
Revenue Per Fiscal Year (FY)
FY 2020 - $69,217,000
FY 2021 - $83,959,000
FY 2022 - $93,512,000
FY 2024 - $90,155,000
Source: Yahoo Finance
FedEx’s revenue in the past four years has been nothing short of amazing. While revenue has increased, the company saw revenue decrease by 4% compared to FY 2023.
Revenue saw a slight dip in FY 2024 due to macroeconomic conditions, particularly inflation and higher-than-normal global interest rates, per the company’s 2024 annual report.
These factors, among others, caused FedEx’s services to see less demand, and this was the case for most of its segments.
The company responded by cutting costs wherever possible. This included reducing certain Sunday operations, canceling projects, and delaying wage increases, among other tactics.
Fuel prices, in particular, increased by 16% in 2023, and FedEx offset this by decreasing its fuel usage, per the company’s 2024 annual report.
As for 2024, the company expects these same macroeconomic conditions to impact demand for its services negatively.
To combat this, FedEx will continue to evaluate new and existing projects since these projects can become costly over time.
As 2024 progresses, the company’s quarterly revenue will ultimately show whether its tactics are successful.
52 Week Stock Movement (as of 1/8/24)
Hi - $285.53
Low - $180.88
Source: Yahoo Finance
FedEx’s stock is slightly less than a month from its 52-week high. FedEx saw its stock price peak in early December 2023. Various factors have contributed to the company’s dip since early December 2023, primarily interest rates.
As noted earlier, high-interest rates negatively impact the company’s customers, and rates have more or less remained where they’ve been for the past 2-3 months.
Of course, the company’s own outlook contributes to its stock movement. FedEx’s outlook includes its stock buyback program and labor contract agreements.
Recently, it was announced that FedEx plans to shed 13% of guaranteed flight hours in addition to pushing 400 of its senior crew members into early retirement.
This results from what the company calls “severe overstaffing,” combined with a drop in parcel volumes and a loss from its work from the U.S. Postal Service.
As this plays out, it could have a negative impact on the company’s stock since it deals with both its labor and revenue simultaneously.
However, its buyback program could help FedEx’s stock down the road. The company announced it was accelerating its $1 billion share buyback program.
One of the benefits of a company implementing such a program is that it typically helps increase the company’s stock price.
FedEx’s Strengths
1. Delivery Options
Not many express transportation companies offer the varying delivery options FedEx has. This applies to both international and domestic deliveries.
For example, in the U.S., in addition to regular delivery, customers and businesses can select from 3 overnight package delivery services.
This includes First Overnight, Priority Overnight, and Standard Overnight. The ability to deliver packages and freight with such speed and reliability keeps customers loyal.
2. Robust Transportation Networks
Through organic expansion and acquisitions, FedEx’s transportation network has allowed it to offer delivery solutions that often aren’t an option elsewhere.
FedEx also has connections with other transportation networks, making it even harder for other delivery companies to compete with FedEx.
From Paris, France, to Novara, Italy, to the Guangzhou Baiyun International Airport in southern China to the Kansai International Airport in Osaka, Japan, FedEx truly has a hub in almost every pocket around the globe.
3. Retail Alliances
The company’s alliances with retailers make FedEx more accessible to the public. Customers can drop off packages at about 17,000 Dollar General, Albertsons, and Walgreens.
This is in addition to its unattended delivery drop-off boxes in shopping centers, industrial parks, and office buildings.
Having such options helps increase the chance that customers and businesses will do business with FedEx instead of a competitor.
FedEx – Reasons for Caution
1. Vulnerable to Periods of Little Economic Growth
The company notes that periods of little to no economic growth put the company in a vulnerable economic position as customers spend less; therefore, parcel volumes decrease.
During these times, package and freight markets become even more competitive as customers seek the lowest delivery cost, even if it means a package or freight gets there later.
This forces the company to adjust prices and maybe even lose out on potential business if enough customers choose to go elsewhere.
2. Heavily Affected by Jet & Vehicle Fuel
Due to the nature of its business, the company purchases large quantities of jet and vehicle fuel, and fuel prices can be volatile.
The company, in its 2023 annual report, noted that in recent years up to 2023, it has been quite successful in mitigating this through indexed fuel surcharges.
While this is great, it’s not guaranteed that the company can continue to do so, especially for long periods.
3. Reliance on USPS Relationship
The United States Postal Service is the largest customer of FedEx Express, which primarily provides domestic express delivery.
The contract runs through late September 2024, and if the contract is terminated, the company has acknowledged that this can impact profitability.
FedEx already expects lower volumes from USPS in 2024, and how this will affect the company’s revenue remains to be seen.
Investing in FedEx
FedEx has more than proven that it’s a great company capable of delivering for individuals and businesses in a timely manner.
Investors looking to invest in a dependable company in the express delivery business could do well considering FedEx.
Being that FedEx is one of the more stable delivery companies, you shouldn’t expect its stock price to skyrocket rapidly.
Should FedEx continue to make wise decisions when confronted with adversity, it will likely see further success, albeit at a moderate pace.
With that said, be aware that many factors go into the overall demand for express delivery, and the combination of several negative factors will spell bad news for FedEx.
Think interest rates, inflation, consumers and businesses spending less, and a decrease in international imports and exports.
Final Thoughts
FedEx is a giant in the express delivery space and has achieved this over many decades of great management and through continuously adding to its ever-growing delivery services.
While current issues are preventing the company from increasing its revenue, the same issues are negatively impacting its competitors.
What’s vital to keep in mind is that FedEx is tackling these issues head-first and looking for ways to come out the other side unscathed, if possible.
FedEx’s commitment to increase shareholder value is seen by the actions the company is taking, and that deserves some recognition and credit.
Have you thought about investing in FedEx? Are you currently investing in FedEx? What are your thoughts about FedEx overall as a company.
Let us know your thoughts in the comment section below as we always look forward to reading what you have to say.
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