FedEx Shares Rise On Plan To Maximize Residential Deliveries

With the exponential growth in e-commerce, FedEx Corporation (NYSE:FDX) plans to hand off some of its Express packages to its Ground unit for residential deliveries. This new strategy to integrate the two networks for delivery of selective day-definite residential Express shipments will initially be rolled out at Greensboro, NC in March. It will be extended to other markets in phases through the rest of the year.

FedEx shares, which have displayed a downtrend over the past year due to weakness at its primary revenue-generating segment, FedEx Express, as a result of the U.S.-China trade tensions, gained 4.7% at the close of business on Feb 7 following the above announcement on making “residential deliveries more efficient”.

The move not only aims to handle residential deliveries more competently but also to reduce costs. The expensive last-mile deliveries can be made cheaper by allowing the Express business hand off a fewer number of time-bound packages to the Ground unit for final delivery as that would lower the instances of a driver from both divisions visiting the same customer.

FedEx anticipates 90% of growth in the parcel industry to originate from e-commerce during the period between 2018 and 2026. The company has been making relentless efforts to capitalize on this e-commerce boom. Last month, its low-cost delivery unit, FedEx Ground, started delivering packages seven days a week to cope with the steep surge in e-commerce demand.

Zacks Rank & Key Picks

FedEx carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader Transportation sector are GATX Corporation (NYSE:GATX) , Azul S.A. (NYSE:AZUL) and Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (NYSE:VLRS) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

GATX flaunts an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the preceding four quarters, the average being 21%. Meanwhile, shares of Azul and Controladora Vuela have rallied more than 32% and 68%, respectively, in a year’s time.

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