Recorded in October 2023.
FedEx has a more direct impact on the U.S. economy than 99.9% of U.S. businesses – an actual statistic from Dun & Bradstreet. It was a business started in 1973 by the famous Fred Smith, as his planes delivered 186 packages to 25 cities. Today, FedEx moves about 15 million packages a day, all over the world.
To break down the business, I’m joined by Staley Cates, Vice Chairman of Southeastern Asset Management. We cover the business of FedEx, how this network operates, the integration of Express and Ground services, and its history and valuation relative to UPS. Please enjoy this breakdown of FedEx.
Show Notes:
(00:00:00) – Introduction
(00:04:27) – First question – An overview of Staley’s relationship with FedEx
(00:05:06) – How FedEx is doing as a business in general
(00:06:46) – A look at the different segments of FedEx’s business
(00:08:08) – The differences between FedEx’s express and ground services
(00:09:51) – A brief history of Fred Smith, the founder of FedEx and the opportunity he saw in the market
(00:14:03) – How eCommerce and other trends have affected FedEx over the years
(00:18:36) – FedEx’s position on whether to battle UPS for Amazon’s shipping alternative option
(00:20:25) – A look at the United States Postal Service and its role in the overall eCommerce system
(00:21:39) – The reasons behind the upside in FedEx Ground margins
(00:26:07) – A look at LTL margins when it comes to FedEx Express services
(00:28:20) – Potential opportunities for FedEx moving forward
(00:31:24) – The re-fleeting of FedEx planes and other potential areas in FedEx’s business that may require capital expenditures
(00:33:19) – The challenges FedEx faced when integrating the acquisition of TNT
(00:36:04) – Bringing together FedEx’s different businesses to get an overview of the entire organization
(00:38:34) – Wage inflation and how that will affect FedEx’s margin profile overall
(00:42:56) – The potential for FedEx to compete with Amazon more directly
(00:45:42) – FedEx’s current stock price and its potential
(00:50:29) – FedEx’s use of railroads and its expansion over the past two decades
(00:52:54) – An overview of the risks FedEx could face in the future
(00:54:19) – The lessons learned from studying FedEx