FEDEX CORP. (New York symbol FDX; www.fedex.com) delivers packages and documents in the U.S. and over 220 other countries and territories.
The stock has moved up in the past few weeks, partly due to speculation that activist investment firm Pershing Square Capital Management will soon make a significant investment in FedEx.
Like most hedge funds, Pershing has a mixed record of unlocking hidden value and increasing share prices. Meanwhile, FedEx is already restructuring as more companies choose slower but cheaper delivery methods, like trucks and ships, over its more expensive overnight international air service.
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Stock investing: Restructuring plan takes bite out of earnings
FedEx’s restructuring involves upgrading to more efficient planes and cutting jobs. Costs related to this plan lowered its earnings by 23.2%, to $1.6 billion, or $4.91 a share, in its 2013 fiscal year, which ended May 31, 2013. In 2012, it earned $2.0 billion, or $6.41 a share. Without unusual items, earnings per share fell 5.5%, to $6.23 from $6.59.
Revenue rose 3.8%, to $44.3 billion from $42.7 billion. Revenue at FedEx’s express international air delivery division (which supplies 61% of the total) rose just 2.5%.
However, revenue at the Ground division (24%), which only operates in North America, gained 10.5%. Revenue from the trucking business (12%) rose 2.3%, while revenue fell 5.4% at the logistics and other services division (3%). The company pays a $0.60 dividend which yields 0.6%.
In the latest edition of Wall Street Stock Forecaster, we look further into Pershing Square’s interest in FedEx. We also look at FedEx’s financial outlook and the long-term effects of its restructuring plan. We conclude with our clear buy-hold-sell advice on the stock.
COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members
There is plenty of news about the role of activist hedge funds these days—witness the role that Pershing Square took with CP Rail last year, pushing the candidacy of Hunter Harrison as CEO. If an activist investor takes an interest in a stock, are you confident that the company will improve thanks to pressure from that investor? Or do you worry that the activist investor has found a weakness that may be fatal to the company’s prospects? Let us know what you think.
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