Will FedEx (FDX) Stock be Affected by TNT Bid Approval Request?

NEW YORK (TheStreet) -- FedEx (FDX) has requested that the European Union's competition regulator approve the package delivery service company's $4.9 billion offer to acquire its Dutch competitor TNT Express (TNTEY), Reuters reports.

Shares of FedEx are lower by 1.15% to $171.74 in pre-market trading on Monday morning.

FedEx sent its request for approval on Friday and it should take about 25 business days for the EU to finish its preliminary review.

If it goes through, the acquisition of TNT Express would enhance the company's reach in Europe and extend its competition with United Parcel Service (UPS) and Deutsche Post (DPSGY), Reuters added.

In 2013 TNT Express agreed to a takeover offer from UPS, but it was rejected by the European Commission. Analysts are expecting the deal between FedEx and TNT Express to cause fewer issued than the UPS deal, as it would create strong competition in Europe, Reuters noted.

Separately, TheStreet Ratings team rates FEDEX CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate FEDEX CORP (FDX) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • FDX's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.48, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, FDX has a quick ratio of 1.59, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $1,893.00 million or 12.27% when compared to the same quarter last year. Despite an increase in cash flow, FEDEX CORP's average is still marginally south of the industry average growth rate of 13.83%.
  • FEDEX CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, FEDEX CORP reported lower earnings of $3.09 versus $6.79 in the prior year. This year, the market expects an improvement in earnings ($10.90 versus $3.09).
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: FDX Ratings Report

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