FedEx is planning to buy back 32 million shares of outstanding stock, in addition to the previously announced buyback of 7.4 million shares.
According to a William Blair analysis, Wednesday’s stock price valued the 32 million shares at $3.84 billion, making each share worth $120. FedEx reported $5.1 billion in cash at the end of its fiscal first quarter.
The company announced no timeline for the program and said it could be suspended at any time. As of Sept. 30, FedEx had 317 million outstanding shares.
“The stock buyback plan reaffirms our confidence in the company’s strategy and long-term growth potential. It also demonstrates our ongoing commitment to delivering value to our shareowners,” FedEx Chairman Fred Smith said in a statement. “Our strong balance sheet provides us with the flexibility to initiate this stock repurchase program while continuing to execute our strategic growth initiatives.”
While FedEx stock has moved higher by 25 percent so far this year, analysts at Cowen and Co. said carrier officials have other reasons for the buyback.
“The stock has moved significantly higher... The move in shares has more to do with the $1.7 billion profit-improvement plan than improved industry fundamental. Parcel movements continue to be negatively impacted by declining weight and a sluggish global economy,” Cowen wrote.
Cowen added freight operators have been trying to find the right capacity balance in Asia and points to UPS and Lufthansa as two recent examples of carriers that have taken planes out of the area.
“There have been some signs of improvement in Europe and the U.S.,” Cowen wrote, “as both have seen freight volumes improve since April.”