Company profile
Founded of company
FedEx (FedEx, ticker: FDX) was founded in 1971 by Frederick Smith. It is an international express delivery group that provides overnight express delivery, ground express delivery, heavy cargo transportation, document copying and logistics services. FedEx serves 3 million customers in 210 cities every day.
Founder
FedEx announced on March 29, 2022 that its founder, Frederick. After more than 50 years of service to the company, Smith will step down from his executive role and will be replaced by operations chief Raj Subramaniam. Under Smith’s leadership, FedEx has grown from a small company in Indiana to a global transportation giant with approximately 570,000 employees.
Smith first conceived the idea for FedEx when he was a student at Yale University, when he believed that emergency transportation services were a top priority for the economy. According to FedEx’s official corporate history, Smith named the brand FedEx because he believed that the patriotic meaning associated with the word “Federal” would remind people of the benefits of national economic activity. FedEx originally had only 14 airplanes in 1973. Now, in addition to hundreds of airplanes, its logistics network spans the world, with revenue in 2021 of nearly US$84 billion.
IPO
There were heavy losses in the early days; however, a few years later, business began to improve, and in July 1975, the company made its first profit. In 1978, FedEx officially went public.
Company Operations
Business units
FedEx has four operating business units:
- FedEx Express: A leading global express transportation company, providing express services worldwide through its extensive air and ground networks (47% of total revenue).
- FedEx Ground: Leading small package ground delivery service in North America (39.1% of total revenue).
- FedEx Freight: One of the major players in the less-than-truckload (LTL) segment, which involves shipping multiple shipments in one truck (10.3% of total revenue).
- FedEx Services: The department that provides support functions (sales services, marketing, technology, communications, customer service, technical support, billing, administration, etc.) to support the company’s various business units (accounting for 4% of total revenue).
Spin-off of freight business
FedEx announced in December 2024 that it would spin off its less-than-truckload (LTL) freight division, which handles large shipments, into the FedEx Freight division listed above, within the next 18 months. The company said separating the business into a separate company, FedEx Freight, would help increase “operational focus, accountability and flexibility.” FedEx Freight had revenue of $9.4 billion last year.
Bloomberg Industry Research estimates the freight unit’s enterprise value at more than $30 billion. Investors are salivating at the prospect of FedEx Freight competing with trucking companies Old Dominion Freight Line Inc. (ticker: ODFL) and XPO Inc. (ticker: XPO).
The importance of FedEx
Dow Jones Transportation Index
The Dow Jones Transportation Average (DJTA) is sometimes called the Dow Jones Transportation Index. It is one of several stock market indexes created by Charles Dow, founder of the Wall Street Journal and Dow Jones & Company. It is one of the oldest U.S. stock market indexes on the market. It was first published on July 3, 1884. .
The Dow Jones Transportation Index is an ancient economic indicator that has existed for more than 140 years. Historical experience has proven the value of this index. It is currently made up of 20 stocks in the Dow Jones Transportation Index — including railroad operators, airlines, package carriers and trucking companies — and poor performance could signal a weakening economy or, if they fail to rebound, could would prevent significant progress in the broader market.
Barometer of economic activity
The Dow Jones Transportation Indexes are “a barometer of future economic activity, and they may be signaling that while a recession is not imminent, a slowdown may be coming.”
FedEx is the most representative component of the Dow Jones Transportation Index, which is why many Wall Street analysts must track this stock.
A downward company
2019 is the dividing point
The constant impact of drastic changes in the operating environment has forced FedEx, a specialist in express delivery of packages and goods in the United States, to repeatedly lower its profit targets in 2019 alone, totaling As many as four times. In the second quarter of fiscal year 2019 (ending November 31, 2019), the company’s operating income declined by about 3%, but the magnitude of the profit decline was as high as nearly 40%.
Amazon has terminated its air and ground logistics cooperation with FedEx in June and September 2019. However, Amazon previously did not restrict third-party sellers on the website from using FedEx, but only banned Amazon’s own products.
Amazon decides to deliver by itself
In addition to the increase in operating costs, Amazon has established its own aircraft air freight team and no longer uses FedEx or DHL to transport its goods in large quantities. This has also had a great impact on the operations of FedEx and DHL. In addition, the shrinkage of global air freight volume caused by the booming era of trade protection is also critical, because this is the company’s core business.
A typical financial result
On December 19, 2023, FedEx’s quarterly report revealed the weakness of the company’s express air business, with customers choosing to use slower and lower-cost transportation methods to send packages. This led the company to lower its full-year revenue forecast and report quarterly profits well below analysts’ targets, causing the stock price to plummet 9.8%. Due to falling demand, the company’s express delivery business, which accounts for the largest revenue, suffered a heavy setback.
Competition landcaope
Rivals
FedEx’s main competitors include DHL (ticker: DHLGY), UPS (ticker: UPS), Amazon (ticker: AMZN), the United States Postal Service (USPS), and the Netherlands’ TNT (ticker: TNTFF). FedEx, DHL, UPS and TNT are among the four largest express delivery companies in the world.
Top four express delivers in U.S.
According to the New York Post, both UPS and FedEx have been overtaken by Amazon as the largest delivery companies in the United States, and Amazon has shipped more packages to American households in recent years than the two delivery giants.
According to the Wall Street Journal, Amazon surpassed UPS in package volume in 2022 and FedEx in 2020, with the gap continuing to widen in 2023.
In 2023, Amazon has surpassed UPS and FedEx to become the largest express delivery company in the United States. Amazon internally estimates 5.9 billion packages to be delivered.
According to Statista, FedEx shipped a total of 2.84 billion packages in 2023.
According to UPS, the total number of packages processed throughout 2023 will reach 5.7 billion.
However, the United States Postal Service (USPS) remains the largest package service in the United States, and the USPS is still responsible for processing packages for Amazon, UPS and FedEx. In 2023, according to data released by the U.S. Postal Service itself, the total number of packages processed by the U.S. Postal Service was 7.1 billion.
Acquisition of TNT Express
In order to strengthen its global logistics network, FedEx acquired Dutch express TNT Express for US$4.8 billion in 2016. It will still take several years to complete the integration. Whether it can reverse the company’s declining business trend is currently unknown. I can’t tell, and as for the future, it’s hard to tell.
Related articles
- “Fedex directly linked to economic prosperity, how does Fedex make money? why it’s downward? “
- “Powerful and persuasive Buffett indicator, whether market is overheat“
- “Why market fall after Q2 2004 earning report?“
- “Sahm Rule, a 100% accurate recession indicator, was triggered“
- “Irrational Exuberance Indicator“
- “Buffett’s most important original book “Tap Dancing to Work”“
- “The relationship between GDP and stock prices“
- “Tax, inflation and rate are the top three serious killers to investors“
- “US Gross domestic product (GDP) querier“
- “Simple and compound interest calculator“
- “IRR Calculator“
- “Investors should care annualized rate of return (IRR), calculate with free IRR Calculator“
Disclaimer
- The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
- I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.
