Why Is FedEx (FDX) Stock Up Today?

FedEx (NYSE:FDX) stock is up nearly 5% today on news that company founder and long-time CEO Fred Smith will step down in June of this year.

A FedEx (FDX) employee loads a FedEx Express truck in Manhattan.
Source: Antonio Gravante / Shutterstock.com

Succeeding Smith will be Raj Subramaniam, a 30-year veteran of the delivery and logistics industry and current president and COO of FedEx. Subramaniam will serve as both CEO and president of FedEx after June 1, while Smith plans to transition to executive chairman of the company’s board of directors.

Prior to today, FDX stock had declined 11% year to date to $230 per share.

What Happened With FDX Stock

Fred Smith, age 77, started Federal Express (now FedEx) in 1973, pioneering the rapid delivery of small parcels and documents. The company started out with only 14 planes and fewer than 400 employees. Over the following 49 years, Smith grew FedEx into a preeminent package delivery and logistics company that today has nearly 2,000 air and ground service locations worldwide and a global workforce of more than 600,000 people.

Subramaniam joined FedEx in 1991 and has previously served in several roles in both Asia and the U.S. In this time he has served high-ranking positions like chief marketing and communications officer, and also was the top exec of FedEx Express. Subramaniam was promoted to the role of president and COO in 2019 and joined FedEx’s board of directors in 2020. Smith said in a news release that for the past several years he had recommended to FedEx directors that if anything should happen to him, they should name Subramaniam CEO.

A former U.S. Marine who served two tours of duty in Vietnam, Smith famously wrote a paper on the concept for an overnight delivery service while studying economics at Yale University and earned a C grade on it.

Why It Matters

FedEx is seen as an economic bellwether in the U.S. and helped to create the modern just-in-time logistics model. The company is a financial powerhouse, having earned $5.2 billion in net profits on $84 billion of revenue in its most recent fiscal year. It will be interesting to see how FedEx and its stock perform once Smith officially leaves the CEO role. As a company, FedEx has never had a CEO other than Fred Smith.

FDX stock flourished during the pandemic as demands for its delivery services skyrocketed. Since going public in 1982, FedEx stock has gained more than 3,500%, outpacing the benchmark S&P 500 most years over that time period. Smith himself owns nearly 20 million shares of FedEx stock.

What’s Next for FedEx

FDX stock gets a nice bounce today on news of the company’s succession plan, which is positive for shareholders. Could the move to a new CEO spark a broader rally in the share price? Time will tell. But FedEx’s stock could use a prolonged rally given that shares are currently down 15% over the past 12 months, largely due to global supply chain constraints.

On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

Article printed from InvestorPlace Media, https://investorplace.com/2022/03/why-is-fedex-fdx-stock-up-today/.

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