FedEx (FDX) plans for a ~$5.9 billion capital expenditure or capex in fiscal 2018. In fiscal 2017, the company spent ~$5.1 billion on capex, accounting for 8.5% of revenues.
FeEx has been aggressively investing in its Ground segment network, though its primary aim remains to modernize its Express vertical and the expansion of FedEx Ground capacity.
FedEx’s capex for the Ground segment will be higher in fiscal 2018 on a YoY (year-over-year) basis. The company noted that oversized-package volumes during the December holiday season have risen ~240% over the past ten years. Such packages now account for 10% of FedEx Ground’s overall volumes.The company intends to make further investments in sortation technology, which offers better service for oversized packages.
In fiscal 1Q18, FDX rolled out new technologies to optimize its Ground delivery options for SmartPost. The company has plans to invest in material handling and in lifting technologies to deal with the large sized packages.
FedEx has meanwhile been investing in FedEx Express’s fleet modernization. The company will be replacing the old Boeing (BA) planes with the new 767s and 777s. In FedEx’s Freight segment, the company anticipates lower capex in fiscal 2018 YoY.
FedEx’s growth estimates for economy
FedEx foresees moderate growth in the world economy and estimates a 2.2% growth rate for US GDP in calendar 2017 and a rate of 2.5% in calendar 2018. FedEx remains hopeful in a solid rise in consumer spending in the US.
FDX anticipates that US consumer spending will grow 2.6% in calendar 2017 and 2018. US industrial production growth is expected to be 2% in calendar 2017 and 2.5% in calendar 2018. The company has a 2.7% growth forecast for global GDP growth of 2.7% for calendar 2017 and of 2.8% for the next calendar year.