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FedEx (FDX) Stock Up 14% on Dividend Hike & Board Changes
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FedEx Corporation (FDX - Free Report) hiked its dividend by more than 50% and announced the addition of two independent directors to its board as part of a cooperation agreement with long-time shareholder D. E. Shaw group. Following this, shares of the company jumped 14.4% at the close of business on Jun 14.
FedEx raised its dividend by 53% to $1.15 per share (annually: $4.60). The dividend is payable to shareholders on Jul 11, of record as of Jun 27. The dividend yield, based on the new payout and its Jun 14 closing price, is 2%. The move underscores the company’s sound financial health as it utilizes free cash flow for enhancing shareholders’ returns.
FedEx’s measures to reward its shareholders through dividends and share buybacks are encouraging. In June 2021, FDX raised its quarterly dividend by 10 cents to 75 cents per share (or $3 annually). In December 2021, FDX's board cleared a new share buyback scheme worth $5 billion, under which the company entered into an accelerated buyback agreement with Goldman Sachs. Under the agreement, FedEx has agreed to buy back its common stock worth $1.5 billion from Goldman, with an initial delivery of approximately 4.8 million shares based on current market prices. Purchases under the accelerated share repurchase program are expected to have been completed before the end of fiscal 2022 (before May 31, 2022).
FedEx has added two independent directors, Amy Lane and Jim Vena, to its board, effective immediately, in coordination with activist investor, D. E. Shaw group. Later, a third independent director will be added to the board in consultation with D. E. Shaw group.
The board changes come close on the heels of Raj Subramaniam taking charge as the CEO of the company from Jun 1 onward as founder and then-CEO Frederick W. Smith becomes the executive chairman of the board.
While the significant dividend increase and the announcement of adding three independent directors to its board in coordination with activist investor D. E. Shaw boosted the FDX stock, the same has struggled in 2022, declining 11.1% in the year-to-date period. The downside was primarily due to supply chain disruptions and tight labor market conditions.
Image Source: Zacks Investment Research
High transportation and labor costs are hurting FDX’s margins. Higher operating expenses pertaining to labor market woes and wage pressures, as well as increased costs related to network expansion, are affecting performance at the Ground segment (the second largest segment at FedEx in terms of contribution to revenues).
Zacks Rank & Key Picks
FedEx carries a Zacks Rank #3 (Hold). Some better-ranked stocks within the broader Transportation sector are as follows:
Shares of Star Bulk have gained more than 27% in a year.
Golar LNG Limited (GLNG - Free Report) carries a Zacks Rank #2. The company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in three of the preceding four quarters and missed once, the average surprise being 42.1%.
Shares of Golar LNG have rallied more than 69% in a year.
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FedEx (FDX) Stock Up 14% on Dividend Hike & Board Changes
FedEx Corporation (FDX - Free Report) hiked its dividend by more than 50% and announced the addition of two independent directors to its board as part of a cooperation agreement with long-time shareholder D. E. Shaw group. Following this, shares of the company jumped 14.4% at the close of business on Jun 14.
FedEx raised its dividend by 53% to $1.15 per share (annually: $4.60). The dividend is payable to shareholders on Jul 11, of record as of Jun 27. The dividend yield, based on the new payout and its Jun 14 closing price, is 2%. The move underscores the company’s sound financial health as it utilizes free cash flow for enhancing shareholders’ returns.
FedEx’s measures to reward its shareholders through dividends and share buybacks are encouraging. In June 2021, FDX raised its quarterly dividend by 10 cents to 75 cents per share (or $3 annually). In December 2021, FDX's board cleared a new share buyback scheme worth $5 billion, under which the company entered into an accelerated buyback agreement with Goldman Sachs. Under the agreement, FedEx has agreed to buy back its common stock worth $1.5 billion from Goldman, with an initial delivery of approximately 4.8 million shares based on current market prices. Purchases under the accelerated share repurchase program are expected to have been completed before the end of fiscal 2022 (before May 31, 2022).
FedEx has added two independent directors, Amy Lane and Jim Vena, to its board, effective immediately, in coordination with activist investor, D. E. Shaw group. Later, a third independent director will be added to the board in consultation with D. E. Shaw group.
The board changes come close on the heels of Raj Subramaniam taking charge as the CEO of the company from Jun 1 onward as founder and then-CEO Frederick W. Smith becomes the executive chairman of the board.
While the significant dividend increase and the announcement of adding three independent directors to its board in coordination with activist investor D. E. Shaw boosted the FDX stock, the same has struggled in 2022, declining 11.1% in the year-to-date period. The downside was primarily due to supply chain disruptions and tight labor market conditions.
Image Source: Zacks Investment Research
High transportation and labor costs are hurting FDX’s margins. Higher operating expenses pertaining to labor market woes and wage pressures, as well as increased costs related to network expansion, are affecting performance at the Ground segment (the second largest segment at FedEx in terms of contribution to revenues).
Zacks Rank & Key Picks
FedEx carries a Zacks Rank #3 (Hold). Some better-ranked stocks within the broader Transportation sector are as follows:
Star Bulk Carriers (SBLK - Free Report) carries a Zacks Rank #2 (Buy). The company's earnings have surpassed the Zacks Consensus Estimate in three of the preceding four quarters and missed once, the average surprise being 7.1%. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Shares of Star Bulk have gained more than 27% in a year.
Golar LNG Limited (GLNG - Free Report) carries a Zacks Rank #2. The company has an impressive earnings surprise history, having outperformed the Zacks Consensus Estimate in three of the preceding four quarters and missed once, the average surprise being 42.1%.
Shares of Golar LNG have rallied more than 69% in a year.