FedEx (FDX) Does What Brown Can't - Barron's
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FedEx (NYSE: FDX) looks to ride the economic recovery and deliver bigger earnings to investors through the next several quarters, a Barron’s article reported today. The shares are already up over 100% since hitting the bottom on March 9, 2009 outpacing the S&P 500, who has seen a gain of about 63%.
An obvious reason for such a momentous gain would be that FedEx is a major player in an industry that is tied closely to GDP numbers and general economic recovery; an extraordinarily cyclical stock.
The economic recovery is even more reinforced by FedEx’s prediction that its busiest day of the year, December 14, will see them shipping about 8% more packages year-over-year. This amounts to 13 million this year versus 12 million in 2008.
Shares of FedEx have also returned about 5.7% every year, compared to 0.3% for United Parcel (NYSE: UPS) and a (0.3%) for the S&P 500.
Because of the cost, FedEx’ largest source of revenue is their Express division. FedEx Express relies mainly on airplanes, unionized pilots, landing fees, and other larger costs, that are passed along to the consumer for the convenience of overnight, or even same-day, package delivery. Express, however, has nice operating leverage, making it well-positioned when a full economic recovery occurs.
FedEx Ground is also a great hedge against a down economy. Their drivers are largely independent, and get paid based on the amount of stops they make and packages they move. The division has also grown, accounting for about 20% of total revenues last year versus 11% in 2000.
Finally, FedEx’s market share has grown in the U.S. to 22%, compared to 10.6% in 1999.
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