Despite an expected global slowdown in 2007, the world's biggest fast-delivery company will benefit from strong consumer demand in China & India.
Over the past 30 years, the value of air cargo shipments has increased an amazing 1,395% while the overall value of world trade grew 355%. By value, 40% of global trade transactions are now delivered via aircraft.
Owner of the world's largest express transportation company, FedEx continues to profit from long-term growth trends in global trade and air cargo shipments. FedEx implemented an eastbound around-the-world flight in 2006, which doubles the company's delivery capacity between Europe and Asia. FedEx had introduced a westbound global flight in the prior year that was highly successful.
FedEx Business Segments
With annual revenues of some US$35 billion in 2007, FedEx is organized into four major businesses:
- FedEx Express (64% of 2006 revenues) flies priority shipments to more than 220 countries and territories;
- FedEx Ground (17%) provides small-package ground delivery services throughout the United States and Canada;
- FedEx Freight (14%) moves less-than-truckload shipments across North America; and,
- FedEx Kinko's (5%) specializes in document solutions and business services.
FedEx Express shipped an average of 3.3 million packages per day in 2006. International shipments now account for 40% of the company's total package revenues compared with 38% in 2005.
Company Growth Prospects
Company revenues in 2006 grew 10%,slower than the 19% annual increase in 2005. For the six months ending November 30, 2006, revenues from FedEx domestic parcel deliveries were up 3% while those from international parcel deliveries rose 14%.
Although management expects that global economic growth will slow to 3% in 2007, FedEx continues to expand its footprint in two of the world's fastest-growing economies.
China and India are projected to become the world’s largest consumer markets within the next 25 years, growing their total purchasing power 5 times more than Americans enjoy today.
FedEx Express In China
FedEx first established international express operations in China in the mid-1980s. To accommodate demand for more air shipments, FedEx has added three weekly flights between China and the U.S.
In January 2006, FedEx paid US$400 million in cash for a 50% share of FedEx-DTW International Priority express joint venture plus DTW Group's domestic express network in China. FedEx has also started a new Asia-Pacific hub in Guanzi, China.
FedEx Express In India
FedEx is the first express delivery company to fly international air routes directly into India. The company recently expanded its delivery routes to include 4,400 Indian cities and towns, and introduced the first overnight express flight from India to China.
Just in time for U.S. holiday sales, FedEx is well-prepared for seasonal revenue peaks from October to December when air shipments from Asia-to-U.S. are expected to accelerate.
Sources For This Article
This article presents independent calculations and insights based on data drawn from source material from Investor Relations on fedex.com. This article focuses on FedEx's 2006 annual report and its March 21, 2007 news release "FedEx Reports Third Quarter Earnings".
