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A Shipping Titan Improves Its Competitive Position

Fed Ex's narrow moat is widening, thanks to improvements in its ground shipping segment.

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Shipping pioneer FedEx continues to refine its portfolio to increase margins and capture more of its clients' shipping spending. Well known for overnight parcel deliveries, FedEx has improved its competitive advantage by building the capacity to handle additional modes of shipping. Fulfilling more of its customers' needs makes FedEx more difficult to displace and a bigger, stickier part of clients' operations.

Despite the shipping industry's significant and costly barriers to entry, we limit FedEx's economic moat rating to narrow rather than wide. This is because we expect the firm to outearn its cost of capital by only a slim margin, and this tempers our confidence that the firm reliably will exceed its cost of capital two decades from now.

Keith Schoonmaker does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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