FedEx is up 3% following FQ1 earnings (revenue up 6% yoy; operating income up 24% yoy; operating margin expansion up 130 bps yoy; net income up 24% yoy).

Growth was spurred by strong performance by the FedEx Ground business unit, volume and revenue increases by the freight line, and surges in U.S. domestic volume at FedEx Express.

Logistics is an inelastic service, and I am long on FedEx in the long term because FedEx is the prime benificiary of  the consumer shift to digital commerce.

Short Term Catalysts

• The US domestic economy is upbeat and consumer confidence will continue to drive volume and earnings through CQ4 2014
• The Alibaba IPO will continue to publicize online buying; further spurring the popularity of ecommerce

Long Term Drivers

• FedEx Home Delivery has partnered with Amazon to handle weekend package deliveries. This could prompt a longer term partnership. Key trends in ecommerce include expedited delivery (the next frontier includes same day delivery). While ecommerce giants may plan to execute these orders and shipments themselves, it seems impossibility for these companies to vertically integrate a logistics business. FedEx is poised to be a key partner with US ecommerce companies
• Relative to its competitors, FedEx operates with a leaner corporate structure. Its FedEx Ground business unit devolves responsibility on a contract basis (vs employee basis). Within each terminal, operating routes are divided and controlled by owner operators, lessening the need for corporate bureaucracy
• Employees are non-unionized, eliminating the potential for strikes (which have hurt competitors like UPS in the past)