FedEx Continues Inorganic Growth - Analyst Blog

FedEx Corporation (FDX) recently entered into an agreement to acquire MultiPack, a Mexican domestic express package delivery company. The deal is expected to be completed in the second calendar quarter of 2011, subject to regulatory approvals and customary conditions.

The services offered by the newly acquired firm MultiPack includes package delivery, transportation, warehousing and logistics services with a pick-up and delivery network support across all 31 Mexican states and the Distrito Federal. It is operating since 1939, and presently has 48 distribution centers, 13 warehouses and more than 500 retail outlets across the country.

The Mexican economy is essentially export-oriented. More than 90% of that country's trade is under free trade agreements with more than 40 countries. Mexico currently has a moderate GDP growth rate of 5.3%.

As the Mexican market continues to grow, customers are looking forward to a one-stop solution for their domestic and international transportation and logistics needs. This acquisition will allow FedEx to establish a strong foothold in the Mexican domestic market with its transportation and logistic services and its presence in more than 220 countries and territories.

Last month, FedEx announced its intention to buy the logistics, distribution and express businesses of AFL Pvt. Ltd., which is a transportation and logistics company in India. This indicates that the company is aggressively truing to expand through acquisitions in major developing countries like India and Mexico.

FedEx faces stiff competition from its close rival United Parcel Service (UPS). Recently, FedEx increased its freight rates followed by United Parcel. Both the companies enjoy a huge presence across the world serving more than 200 countries.

FedEx currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.

 
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