Fools, I don't mean to belittle FedEx's accomplishments in a year that was obviously rough for anyone who uses -- you know -- fuel. While today's surprise decision by the International Energy Agency to unleash 60 million barrels of crude upon a price-shocked market has given a reprieve to heavy users like Delta
This crimped profits at FedEx in particular, making the company's fiscal 2011 turnaround just that much more impressive:
- Sales up 13% versus fiscal 2010.
- Operating profit up 19%.
- Net income up 23%, with adjusted per-share profits rising 30% to $4.90.
And the fact that FedEx now tells us it's going to grow earnings another 35% in fiscal 2012, to $6.60 per share in profit? Great news -- but still not good enough to get me to buy the stock.
Call me a skeptic, call me a Fool, but no matter how good the headlines read, when I get a copy of FedEx's earnings in hand, I always head straight to the cash flow statement to see how the business is really doing. Sadly, the news here is not good. Despite reporting $1.45 billion in profit last year, FedEx showed a mere $607 million in actual free cash flow generated for the period. At today's prices, therefore, a share of FedEx will set you back about 48 years' worth of actual cash profit -- and it gets worse.
Last year, FedEx laid out $3.4 billion on capital expenditures (the bulk of which went to "aircraft and related equipment"). This year, management promises to spend $4.2 billion on capital expenditures -- a 24% increase. Boeing
Make no mistake: FedEx is an admirable enterprise. Alongside UPS
Fool contributor Rich Smith does not own, or short, any stock named above. The Motley Fool, however, owns shares of United Parcel Service and FedEx, and Motley Fool newsletter services have recommended buying shares of FedEx. The Motley Fool has a disclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.