FedEx Heads to $114 on International Growth

+1.44%
Upside
290
Market
294
Trefis
FDX: FedEx logo
FDX
FedEx

FedEx Corp. (NYSE:FDX) primarily serves the U.S and is rapidly expanding its presence into new markets. It provides a broad range of transportation, e-commerce and business services under the FedEx brand. The company is best known for offering express small package and document shipping services through FedEx Express. Its main competitors are UPS (NYSE:UPS) and national postal services such as the United States Postal Service (USPS).

We currently have a $114 Trefis price estimate for FedEx Corp., which is about 40% ahead of the current market price.

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FedEx plans capital expenditures of $4.2 billion over the next year, 60% of which is expected to be targeted towards long-term growth investment. It will include expansion of global aviation networks to improve the reach and service capability in Asian and European markets.

The company benefits from higher margins for revenue from international operations and is therefore gradually trying to expand its international footprint. Investment in new international markets should provide profit margins ahead of the domestic services.

Purchase of Boeing 777F Aircraft for Asian Routes

FedEx plans to have at least 22 777Fs in service by 2014 and another 16 by 2020 to fly directly across the Pacific. The 777F will set the new standard for freighter aircraft and will enable FedEx to deliver faster than its competitors and bring down the fuel costs, leading to improved operating margins.

Acquisitions in Mexico and India, Direct Services to Columbia

In its effort to expand its geographical footprint, FedEx has taken several initiatives to strength its presence and network in key emerging markets of Latin America and Asia-Pacific.

In July 2011, FedEx Express completed the acquisition of MultiPack to strengthen its network in Mexico. It will allow FedEx to solidify its presence in the Central American region. To deepen its presence in the key Indian market, FedEx completed the acquisition of AFL and its affiliate, Unifreight India early this year. This acquisition is expected to provide FedEx Express access to AFL’s customers to provide them with FedEx’s International ground and air logistics services.

FedEx Express has also recently added Columbia to the markets directly served by FedEx Express. It will help FedEx create a base for further growth opportunities in the large and expanding Latin American market.

See our full analysis of FedEx Corporation.