paraphrasing...<<If the internet business grows, wouldn't that be bullish for Fedex? Could the company find a way to ride this? If their industry stands to benefit in a huge way, would it make sense that they would get some benefit directly from increased business and some indirect benefit from a better competitive environment?>>
Yes and no. FDX will likely benefit from the increasing volume of retail business done on the internet but it is likely, in my opinion, that UPS and USPS will benefit more. Both those companies are designed for low cost home and business delivery vs FedEx time definite (meaning its more costly to accomplish and thus deserving of a higher price). If you look at whose system is designed for increased volume of occasional delivery of low priced goods, it is not FedEx at the top of that list.
Second, FDX has $10b of domestic revenue, $17b overall. (for reference, UPS has probably around $20b overall & I don't know about USPS off the top of my head). How many $$ or what share of low yielding internet volume does it take to impact FDX's bottom line, and consequently its stock valuation? A push to add retail customers like LL Bean a couple of years ago clobbered them as the daily volume swings of low yield volume pushed priority overnight business out of the system (or was late being delivered). FDX subsequently had to reprice a lot of these accounts with the idea of accepting client losses. Now, we're supposed to believe that they're going back to doing the same game? Management's smarter than that.
Again, I like the company, but I just don't buy the internet craze. I think Fred Smith was probably more excited about the online informational/logistics opportunities of the internet (ordering, inventory counting, package tracking) vs retail sales.
Diamondcutter |
