Analyzing FedEx Express Financial Performance

FedEx Express Financial Performance

The financial performance of any organization can be determined through the analysis of its financial statements. Comprehensive income statement, statement of financial position and cash flow statement are the main financial statements. Every end of fiscal year, a company is expected to report its business operations and financial performance throughout the year for the users of its financial statements. These financial statements are utilized to examine and evaluate not only the financial performance, but also the financial position of a company. Suitable and effective analysis of these financial statements makes it conceivable to accomplish valuable financial information, which can be efficiently made use of for decision making. The purpose of this paper will be to analyze the financial performance of FedEx Express.

With respect to revenue generated, in the past three years, the company's revenue amount steadily and gradually increased from $44.3 billion in 2013 to $45.6 billion in 2014 and further up to $47.5 in 2015. Statistics indicate that the revenue of the company increased by approximately 37% in the past five years (FedEx, 2014). This growth in revenue has been in proportion to the economy recovery in the industry as well as the nation in overall. One of the main objectives of FedEx was to improve and increase its operating margins. In particular, in recent periods, the company has been effective and successful in executing its economizing and process restructuring endeavors, fleet upgrading, as well as other initiatives. As a result, these initiatives assisted the company to grow its attuned operating margins to 9% towards the end of last year. In accordance to the information unveiled in the annual reports of FedEx, the company adjusted operating margins increased from 7.8% in 2013 to 7.9% in 2014 and further rose up to 9.0% in 2015. This indicates the level of effectiveness of the company's business operations to generate returns in the fiscal years (FedEx, 2015).

The return on assets ratio is a financial ratio that indicates the profitability of the company in utilizing its assets. Similar to the return on equity, the ROA of FedEx has improved in the past six years from 0.4% in 2009 to 8.7% in 2015. Nonetheless, it is imperative to note that in the past year, the unadjusted return on assets ratio of FedEx declined to 3% as a result of the mark to market pension expenditures (Schmidt, 2015). In addition, FedEx in the past three years has been effective in terms of generating positive and strong cash flows. Statistics indicate that in the last six years, the free cash flow of the company increased by 300% (Schmidt, 2015). Earnings per share (EPS), is a metric, which shows the percentage of a company's profit that is apportioned to every outstanding share of common stock. It basically indicates what every shareholder gets as a return from the profit generated by a company in a fiscal year. The EPS of the company increased from $6.75 in 2013 to $7.05 in 2014 and rose further up to $8.95 in 2015. This indicates that the profitability of the company and returns of the shareholders has consistently improved in the past three years. Another indicator of the extraordinary financial performance of FedEx is with regard to its stock price. The share price of FedEx has increased by 80% in the past three years. The stock price rose from $96.34 in 2013 to $144.16 in 2014 and further up to $173.22 in 2015 (FedEx, 2015).

FedEx experiences high fixed expenses, owing to the nature of its business. The company has to improve in terms of being cost effective and minimizing the expenses incurred by the company. This is for the reason that the total operating costs of the company increased from $90 billion in 2013 to $91.6 billion in 2014 and further up to $96.1 in 2014. This indicates that there is a need to become more cost effective. Between the years 2008 and 2009, the company experienced an austere financial impact due to the financial recession. As a result, FedEx set a number of long standing objectives for financial recovery. Some of these objectives consisted of the improvement of cash flows, growth in profitable revenue, increase in the returns to the stakeholders, attaining an operating margin greater than 10% and also increasing the return on invested capital (ROIC). Thus far, the financial performance of the company has been outstanding and FedEx is on the right path to realizing these objectives (Schmidt, 2015).