What triggered FedEx (FDX) stock rally today?

FedEx Corporation (NYSE: FDX) stock soared nearly 13% to US$226.9 at 10:51 am ET on Tuesday after critical announcements regarding long-term growth and shareholders’ value creation.

On Tuesday, the Tennessee-based air freight company announced a series of business and corporate actions, sending the stock higher.

FedEx said it raised its quarterly dividend by 53%, or US$0.40 per share, to US$1.15, payable on July 11, to stockholders of record on June 27, 2022, at the close of business.

FedEx Executive Vice President and CFO Michael C. Lenz said the dividend raise is the culmination of the Board’s thoughtful efforts over many months and shows the company’s confidence in the business and commitment to stockholders’ returns.

The company also announced linking long-term incentives with a performance metric. It plans to add a performance metric to the total shareholder return (TSR) relative to a broad market index under a cash-based long-term incentive program (LTI) from fiscal 2023 to 2025.

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The LTI program also includes the CapEx/Revenue target metric, which is capital expenditures as a percentage of revenue performance. The company said it intends to lower its CapEx/Revenue target metric to align with its capital plans.

These changes would tie its management compensation directly with TSR and long-term value creation. After the announcements, the stock’s trading volume increased to 6,950,466, more than its 90-day average volume of 2,408,069, suggesting shareholders’ excitement.

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Furthermore, the company is adding two independent directors immediately. After the changes, the Board will have 14 directors, of which 12 will be independent members. 

FedEx has also renamed the Board’s Audit Committee to the Audit and Finance Committee. The renamed committee will be responsible for reviewing the financial affairs, such as capital structure, allocation, and returns, along with current responsibilities.

In the wake of these updates, the FedEx stock soared. 

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Financial performance:

For the three months ended February 28, 2022, it generated revenue of US$23.6 billion compared to US$21.5 billion a year ago. Its net income increased 24.66% YoY to US$1,112 million in the quarter versus US$892 million in the same period in 2021. The EPS diluted came in at US$4.20 for the period versus US$3.30 in the February quarter of 2021.

FedEx’s current market capitalization is US$58.97 billion, and the dividend yield is 1.45%. 

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Bottom line:

Memphis, Tennessee-based FedEx is one of the world’s largest express package providers. It provides customers, including businesses, with a broad portfolio of transportation, e-commerce, and business services. The stock has been trading 22.27% lower YTD.