Why FedEx Seems to Have the Right Mix
The world's second-largest package delivery company, FedEx (NYS: FDX) , recently posted fourth-quarter numbers that reflect the continuation of a trend in the courier industry, as global economic conditions remained fragile and businesses within the U.S. recorded a gradual improvement.
FedEx's top line expanded by 4% as compared to the previous year, bringing in $11 billion, the result of a mixed performance by the company's different segments. Despite an increase in revenue, profits slipped 1.4% to $550 million, weighed down by one-time charges related to aircraft impairment. Excluding the effect of these special items, FedEx earned $1.99 per share, surpassing Street expectations of $1.92 per share.
What fizzled and what sizzled...
FedEx Express, the company's speedy and relatively costly service, which comprised more than 60% of its sales, proved to be a disappointment. Lower daily package volume due to slow Asian demand resulted in revenue rising just 3%.
On the other hand, the smaller unit -- FedEx Ground -- that brought in more than 20% of the company's revenue and already operates at impressive margins, improved further. The ground shipping business witnessed a noteworthy 9% increase in revenue, thanks to better volumes recorded within the country. This further boosted the segment's operating margin.
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During its last reported quarter, industry peer UPS (NYS: UPS) also posted numbers that reflected mediocre growth as a result of softness in Asia, coupled with a slow-moving European market. While the single-digit growth numbers do seem to be an industrywide trend, FedEx is trying hard to improve its operational efficiency by introducing a cost restructuring plan, which it hopes to announce in October. The company has already retired some of its aircraft and engines in an effort to slim down its Express network for better cost effectiveness.
I like the efforts FedEx is making to accelerate its bottom-line growth, which makes it an ideal long-term investment. If you believe in this growth story, too, or if you want to watch this company for a while, I recommend you add FedEx to your watchlist. It takes one click to monitor all the moves of this stock. Click here, it's free!
The article Why FedEx Seems to Have the Right Mix originally appeared on Fool.com.Navjot Kaur does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of FedEx. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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