Article written by Al Root
Software behemoth Microsoft and logistics giant FedEx are joining forces to “transform e-commerce.” That sounds like a big job. To make it happen the pair are launching cloud-based inventory and supply chain management solutions. That’s good news for FedEx investors who have been living through an e-commerce “fog of war.”
Microsoft (ticker: MSFT), with the partnership, gets a new cloud customer. FedEx (FDX) hopes to get a leg up on Amazon.com (AMZN) in the e-commerce delivery wars.
The first solution launched is called FedEx Surround. It “allows any business to enhance visibility into its supply chain by leveraging data to provide near-real-time analytics into shipment tracking,” reads the release. That’s a mouthful. FedEx believes it gives shippers better data on where a package is as it makes its way from producer to consumer.
FedEx wasn’t immediately available to offer more detail about FedEx Surround.
The delivery stakes have been rising as more companies are entering the last mile delivery fray. Amazon and Walmart (WMT) are each developing their own delivery capabilities as e-commerce volumes grow.
The added capacity is needed as online shopping explodes, but investors aren’t sure what new entrants will do to the long term growth and profit margins of United Parcel Service (UPS) as well as FedEx. Wall Street has even suggested Amazon buy FedEx although that seems unlikely . But as the delivery wars have heated up, FedEx valuation multiple has cooled down.
FedEx shares trade for about 11 times estimated calendar 2021 earnings, a discount to the market and to its own trading history. What’s more, shares are down about 32% over the past year, trailing behind comparable returns of the S&P 500 and Dow Jones Industrial Average.