Up, Up, and Away With FedEx

The only things more certain than on-time FedEx (NYSE:FDX) deliveries these days are probably death and taxes. Getting that white box with the purple and blue lettering is about as satisfying as reading through the company's fourth-quarter press release.

FedEx's fourth-quarter earnings of $1.36 per share substantially outpaced last year's $0.92 per-share outcome. Net income jumped a whopping 47%. Management cited "strong momentum in our business," and FedEx experienced robust demand in its ground, international express, and regional less-than-truckload businesses. Revenues for the quarter grew a healthy 21% as the company has been quite successful at bundling various services to its customers.

For the entire year, FedEx earned $3.52 a share, excluding certain items, which was 28% ahead of 2003's results. Full-year revenues rose 10% to $24.7 billion.

The news gets even better as the company looks to the future; FedEx expects fiscal 2005 first-quarter earnings to be $0.90 to $1.00 per share, which is significantly above the previous estimate of $0.80. Management also upped its full-year target to $4.20 to $4.40 per share, from the previous forecast of $4.27. That represents 19% to 25% earnings growth for the giant. Not too shabby.

FedEx also expects a positive impact from FedEx Kinko's, its new unit from the recent Kinko's acquisition, as well as more cost savings from its business realignment program.

The bottom line in all of these numbers is that it's good to be FedEx these days. As Seth Jayson astutely said in his recent FedEx Delivers More Money take, "Anyone who's been watching the company might have seen this coming." Strong results do not happen overnight. Further, FedEx's purchase of Kinko's has given it the operating depth to bundle services and leverage its core delivery strengths.

With UPS (NYSE:UPS) and the United States Postal Service as primary rivals (USPS is also a big FedEx customer), FedEx has gained a real competitive advantage with its acquisition of Kinko's. FedEx shares are trading at about 18 times the company's fiscal 2005 EPS midpoint estimate of $4.30 per share. Based on the expected earnings growth rate, the shares not only trade at a discount (price-to-earnings ratio to growth rate), but are also attractive from a fundamental perspective.

David Gardner recommended FedEx for the February 2003 issue of Motley Fool Stock Advisor . Subscribe and get a six-month, money-back guarantee to learn more.

Fool contributor Phil Wohl spent over 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.