Restructuring Creates Strong Upside for FedEx Corporation (FDX)

FedEx recently agreed to buy 14 used The Boeing Company (NYSE:BA) 757s from United Airlines, with options to buy up to 16 more. According to The Wall Street Journal, the The Boeing Company (NYSE:BA) 757 burns 33% less fuel than the 727 but carries 20% more freight! Since United was already planning to replace the 757s with brand-new Boeing 737s (which are even more fuel-efficient), FedEx probably got a good price, making the deal a no-brainer.

FedEx is also in the midst of retiring a number of other outdated A310 and MD-10 aircraft, replacing them with Boeing 767s and Boeing 777s. The company also expects that by reducing its Express network, it will be able to retire even more older aircraft. This fleet renewal program will be great for FedEx stock owners, as recent improvements in aircraft technology make it possible to replace outdated planes with more efficient models at a relatively low cost.

Ready for takeoff
Today, FedEx Corporation (NYSE:FDX) stock trades for little more than it did five years ago, but the company has significantly diversified its business with the growth of FedEx Ground. Moreover, the cost-cutting initiatives highlighted above provide significant upside for shareholders over the next several years. The stock trades for 16 times adjusted earnings, and profit is expected to grow by more than 20% next year as cost-cutting initiatives begin to take hold. With this reasonable valuation and solid outlook, FedEx looks like a good buy candidate for long-term investors.

The article Restructuring Creates Strong Upside for FedEx Stock originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Adam Levine-Weinberg is short shares of United Continental Holdings (NYSE:UAL) and is long Sept. 2013 $33 puts on United Continental Holdings. The Motley Fool recommends FedEx.

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