Last week, activist investor Dan Loeb proved his clout when he revealed that his company, Third Point, had a stake in FedEx. The announcement caused a 1.6% gain in shares that same day (Nov. 12), with FedEx closing out at $134.63.
FedEx, which was founded by CEO Fred Smith in 1971, is in the process of restructuring the company to lower costs and boost revenue. Loeb likes Smith and said the two had met and had a constructive discussion about the company and its future.
“We like the business,” Dan Loeb said at the DealBook conference in New York on November 12, 2013. “We think that they could better optimize their capital structure, pay a better dividend, and they’ve done that.”
FedEx is focusing its cost-reduction mainly on the FedEx Express unit of the business, which brought in more than half the company’s revenue last quarter. The company plans on retiring older planes, lowering air capacity to Asia, and allowing employee buyouts. Customers are seeking cheaper and slower methods of delivery over the faster express methods, and FedEx is working hard to adjust to that trend.
Loeb is not alone in his confidence in the delivery service. Jim Corridore of S&P Capital IQ also spoke up on its behalf at the DealBook conference, saying, “ We expect FDX to benefit from an improving U.S. and global economy, and we believe FDX’s reorganization plan will cut costs and help raise yields as it redeploys assets. We see opportunity for operating margin expansion on cost cuts and volume growth.