Is FedEx (FDX) in Terminal Decline?
Many people wonder if FedEx (FDX), the delivery company formerly known as Federal Express, is in terminal decline. People wonder if FedEx is in decline because its revenues are declining.
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For example, FedEx’s quarterly revenues fell from $23.242 billion on 31 August 2022 to $21.681 billion on 31 August 2023. Plus, FedEx has suffered four quarters of revenue shrinkage over the past year. FedEx’s revenues fell by -2.81% in the quarter ending on 30 November 2022, -6.23% in the quarter ending on 28 February 2023, -10.10% in the quarter ending on 31 May 2023, and -6.72% in the quarter ending on 31 August 2023.
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Similarly, FedEx’s quarterly gross profit fell from $15.643 billion on 31 August 2022 to $15.544 billion on 31 August 2023. Plus, the quarterly operating income fell from $1.191 billion on 31 August 2022 to $1.485 billion on 31 August 2023.
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FedEx (FDX) has more Cash
Conversely, FedEx (NYSE: FDX)?has more cash. For example, FedEx’s quarterly operating cash flow rose from $1.607 billion on 31 August 2022 to $2.230 billion on 31 August 2023.
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Similarly, the quarterly ending cash flow rose from $6.85 billion on 31 August 2022 to $7.055 billion on 31 August 2023. Interestingly, FedEx’s cash and short-term investments rose from $6.85 billion on 31 August 2022 to $7.055 billion on 31 August 2023.
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Consequently, FedEx’s total assets rose from $85.826 billion on 31 August 2022 to $87.576 billion on 31 August 2023. Thus, FedEx has more value and cash.
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Meanwhile, FedEx’s total debt is rising slightly. The total debt rose from $20.057 billion on 31 August 2022 to $20.496 billion on 31 August 2023. However, FedEx is paying more debt. Its financing cash flow rose from -$247 million on 31 August 2022 to $727 million on 31 August 2023.
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I think Mr. Market grossly overpriced FedEx (FDX) at $243.29 on 19 October 2023. I consider FedEx overpriced because its revenues are shrinking.
?Mr. Market Overprices FedEx (FDX)
Ironically, Mr. Market is paying more for FedEx as its revenues fall. For example, FedEx’s share price rose from $156.98 on 17 October 2022. Thus, Mr. Market is paying more for a stock with a declining business.
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However, FedEx has some attractive features. First, FedEx was the fourth largest US package delivery service with 19.1% of the market in 2022, Pitney Bowes estimates. The largest US package delivery service was the United States Postal Service (USPS) with 31.7% of the market in 2022, UPS was number two with 24.3% and Amazon Logistics was number three with 22.6%.
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Second, FedEx offers an attractive dividend. For example, FedEx has scheduled eight $1.26 quarterly dividends between 8 December 2023 and 1 September 2025. Overall, FedEx offered a $5.04 forward dividend and a 2.07% forward dividend yield on 19 October 2023.
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Amazon (AMZN) causes FedEx’s revenue shrinkage
FedEx’s revenues are shrinking because of Amazon Logistics’ growth. To explain, Amazon Logistics is?Amazon’s (AMZN)?in-house delivery service.
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Amazon Logistics US package delivery market share grew by 127% in 2020, Pitney Bowes claims. Overall, Amazon’s market share grew from 21% in 2020 to 22.6% in 2022.
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However, some Pitney Bowes data shows FedEx could be more Amazon resistant than UPS. FedEx’s package volume grew by 21.7% in 2020 while UPS’s package volume grew by 12.6%. In contrast, USPS’s volume grew by 34% and Amazon Logistics’ share grew by 127% in 2020.
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Conversely, package volume fell by 2.2% between 2021 and 2022, from 21.7 billion to 21.2 as the COVID-19 pandemic ended. Yet, Amazon Logistics grew as FedEx’s parcel volume fell by -5% between 2021 and 2022. Meanwhile, UPS’s package volume fell by -3% between 2021 and 2021. Thus there is also Pitney Bowes data that shows FedEx is vulnerable to Amazon Logistics than UPS.
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Thus, Amazon Logistics is hurting FedEx and UPS. I think this trend will continue because Amazon is America’s most popular shopping service. Amazon Prime had 168.5 million users in 2022, Statista estimates. Statisa proclaims Amazon Prime will grow to over 180 million users?in 2024.
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I conclude FedEx is not in terminal decline. However, the data shows FedEx is in decline. Speculators need to watch FedEx closely because the delivery market is changing. That change could be fatal to FedEx. Particularly, if Amazon becomes America’s largest delivery service.
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1 年Time for Amazon to buy out FedEx, and ups