FedEx's Phenomenal Fix-Up

As Motley Fool Stock Advisor recommendation FedEx (NYSE: FDX  ) goes, so goes the economy. At least, that's what the prognosticators are putting into the headlines today. Fools tend to focus their view a little more narrowly than that, and a keen look at FedEx reveals a shipping company that's firing on all cylinders, whether or not the economy is providing a top-line boost.

The shipper's fiscal third-quarter results feature a whopping 39% jump in diluted earnings, to $0.68 per stub. Were it not for charges owing to the company's ongoing realignment, that number would have reached $0.71. The increases were generated on a solid $6.06 billion in revenues, which represents a 9% rise over the same period last year. The figures include only a modest bump -- about a penny per share -- from last month's acquisition of Kinko's.

The real reason for the increasing profit isn't so much the improving national economy as FedEx's improving efficiency. A quick glance at operating margins for the Express segment, the biggest moneymaker, tells the tale. During the same period last year, the margin stood at 3.2%. This year, it improved to 5%, even including the restructuring charges. An advance of that nature is amazing in a giant company like FedEx, and when yearly revenues are measured in the tens of billions, a couple of percentage points means a lot to the bottom line.

Trading around $72, FedEx goes for about 21 times management's forward guidance of $3.40 per share. That makes it look like a bargain compared to competitor UPS (NYSE: UPS  ) , which sells for nearly the same price, but is projected to earn half a buck less. With further margin improvements and Kinko's contributing to the bottom line, FedEx looks like a good bet no matter what you think of the economy.

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Fool contributor Seth Jayson owns no stake in any companies mentioned above. View his Fool profile here.

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