Short term:
1.
Company needs to increase its operating margin by reducing costs.
a.
Use size and brand name as a strength -- Renegotiate Purchased transportation/Rental & Landing
fee costs ?
i. Potentially take down long term debt to repurchase stock (we are currently at low debt
levels, and rates are at historic lows) , and trade with key suppliers (shares for reduced
costs)
b.
2.
Downsize/sell FedEx Freight, a segment that has been operating at a growing loss.
Create a subsidiary brand focused on cost, rather than delivery time; capture the other side of the market.
a.
Those currently focused on price going to USPS?
i. FedEx has the infrastructure, and must not be running at full capacity; adding volume on
an as-available basis for consumers who are less time-sensitive would increase FedEx
economies of scale without diluting the brand name.
FY 2009
Q2 YTD
FY 2010
Operating Income (Loss):
FedEx Express segment1
794
2%
1,127
3%
621
3%
FedEx Ground segment
807
2%
1,024
3%
583
3%
FedEx Freight segment1
(44)
0%
(153)
0%
(107)
-1%
FedEx Services segment1
(810)
-2%
–
0%
–
0%
747
2%
1,998
6%
1,097
6%
Total Operating Income
Long Term:
1.
2.
Increase focus on FedEx Services, as this is a method to increase the quality of service associated with the
brand, and increase perceived value-added
a.
Specialize in e-commerce services, including consulting, logistics.
b.
Create a network for small businesses to find other services from trusted resources in other parts of
the country. – ex. McKinsey & Berkshire greatest resource was their network
c.
This sector has the potential to be the internal hedge against Express/Ground segments, which
are highly subject to fluctuations in oil price.
3.
Decrease fluctuations in earning associated with fuel prices
a.
Increased use of crude oil forwards/futures in commodities market
b.
Increased use of energy efficient vehicles, as well as commercial solar panels on large facilities
(sell energy back to offset costs)
FY 2009
FY 2010
Q2 YTD
Operating Income (Loss):
FedEx Express segment1
794
2%
1,127
3%
621
3%
FedEx Ground segment
807
2%
1,024
3%
583
3%
FedEx Freight segment1
(44)
0%
(153)
0%
(107)
-1%
FedEx Services segment1
(810)
-2%
–
0%
–
0%
Total Operating Income
747
2%
1,998
6%
1,097
6%
FY 2009
FY 2010
Q2 YTD
Operating Expenses:
Salaries and employee
benefits
Purchased transportation2
13,767
39%
14,027
40%
7,582
40%
4,534
13%
4,728
14%
2,717
14%
Rentals and landing fees
2,429
7%
2,359
7%
1,229
6%
Depreciation and
amortization
Fuel2
1,975
6%
1,958
6%
981
5%
3,811
11%
3,106
9%
1,825
10%
Maintenance and repairs
1,898
5%
1,715
5%
990
5%
Impairment and other
charges1
Other
1,204
3%
18
0%
67
0%
5,132
14%
4,825
14%
2,601
14%
34,750
98%
32,736
94%
17,992
94%
Total Operating Expenses
FedEx Ratio Analysis
Industry: Air Delivery & Freight Services
Growth Rates %
FedEx Industry S&P 500
Sales (Qtr vs year ago qtr)
12.10
11.40
11.70
Net Income (YTD vs YTD)
25.70
46.30
54.60
Net Income (Qtr vs year ago qtr)
-18.30
28.90
72.30
Sales (5-Year Annual Avg.)
3.42
4.30
7.69
Net Income (5-Year Annual Avg.)
-3.99
0.27
7.76
Dividends (5-Year Annual Avg.)
8.70
10.28
4.77
FedEx
Industry
S&P 500
Gross Margin
25.1
24.6
38.1
Pre-Tax Margin
5.6
9.2
17.0
Net Profit Margin
3.6
5.8
12.4
5Yr Gross Margin (5-Year Avg.)
26.7
25.9
37.8
5Yr PreTax Margin (5-Year Avg.)
6.1
7.9
15.3
5Yr Net Profit Margin (5-Year Avg.)
3.5
4.8
10.9
Profit Margins %
Financial Condition
FedEx
Industry
S&P 500
Debt/Equity Ratio
0.13
0.81
1.05
Current Ratio
1.5
1.9
1.4
Quick Ratio
1.4
0.4
0.9
Interest Coverage
28.0
16.4
51.9
Leverage Ratio
1.8
3.1
2.4
46.23
16.62
24.69
Book Value/Share
Investment Returns %
FedEx
Industry
S&P 500
Return On Equity
9.2
32.9
22.4
Return On Assets
5.2
10.5
8.0
Return On Capital
6.3
14.0
10.4
Return On Equity (5-Year Avg.)
9.7
21.3
19.2
Return On Assets (5-Year Avg.)
5.2
8.8
7.5
Return On Capital (5-Year Avg.)
6.6
12.2
10.0
Management Efficiency
FedEx
Industry
S&P 500
Income/Employee
14,204
15,838
106,338
Revenue/Employee
400,194
336,166
953,938
Receivable Turnover
9.2
8.7
14.0
Inventory Turnover
70.5
88.5
12.0
Asset Turnover
1.5
1.9
0.8
FY (05/11)
FY (05/10)
FY (05/09)
1st Qtr
$1.21
$0.58
$1.23
2nd Qtr
$0.89
$1.11
$1.59
3rd Qtr
NA
$0.77
$0.31
4th Qtr
NA
$1.32
-$2.82
$2.10
$3.78
$0.31
Total
REVENUE - QUARTERLY RESULTS (IN MILLIONS)
FY (05/11)
FY (05/10)
FY (05/09)
1st Qtr
9,457.0
8,009.0
9,970.0
2nd Qtr
9,632.0
8,596.0
9,538.0
3rd Qtr
NA
8,701.0
8,137.0
4th Qtr
NA
9,428.0
7,852.0
19,089.0
34,734.0
35,497.0
Total
OWNERSHIP INFORMATION
Shares Outstanding
315.00 Mil
Institutional Ownership (%)
76.59
Top 10 Institutions (%)
34.80
Mutual Fund Ownership (%)
.67
5%/Insider Ownership (%)
3.25
Float (%)
96.76
EARNINGS PER SHARE - QUARTERLY RESULTS
http://moneycentral.msn.com/investor/invsub/results/compare.asp?symbol=FDX