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FedEx reported a huge beat in second quarter earnings after a series dissappointing earnings affected severeing  its Amazon  contracts. $FDX was up over 8% after hours. FedEx had been wounded by a slow European economy but is benefiting from the stay at home world at cheap het fuel and diesel.

fedex holiday

FedEx Corporation NYSE: FDX Reported Earnings After Close Tuesday

$2.53 Beat $1.53 EPS AND $17.40 Billion Beat $17.80 Billion forecast in revenue. 

Earnings 

FedEx reported earnings operating income was $907M vs. $577.4M consensus and $1.72B a year ago. Adj EPS was $2.53 (exp $1.53) FedEx made $17.4 billion in revenue, down from the $17.8 billion made the previous year’s quarter beating an expected $16.3 Billion. The company's operating margin rate fell to 5.2% from 9.6% a year ago and beat the expected 3.4%. Net income was an adjusted $663 million, well below $1.32 billion in 2019’s fourth quarter. The fourth quarter ended May 31.

FedEx said the COVID-19 pandemic affected “virtually all revenue and expense line items” for the quarter. This included a $125 million charge for COVID-19 safety measures, like personal protective equipment and additional cleaning services.

“Though our fiscal fourth quarter performance was severely affected by the COVID-19 pandemic, I am extremely proud of the herculean efforts of our team members,” said Fred Smith, chairman and CEO of FedEx, in a statement. “With safety as the first priority, these men and women provided essential transportation of critical supplies across the globe and delivered peak-level e-commerce volumes in the United States. .

 

FedEx Corporation NYSE: FDX

Reaction After hours $152.45 +12.23 (+8.72%)

After Closing $140.22 USD +5.67 (+4.21%) Closed: Jun 30, on Day

Highlights

 “With safety as the first priority, these men and women provided essential transportation of critical supplies across the globe and delivered peak-level e-commerce volumes in the United States. “While commercial volumes were down significantly due to business closures across the globe, there were surges in residential deliveries at FedEx Ground and in transpacific and charter flights at FedEx Express, which required incremental costs to serve,” FedEx said in its earnings release.

 

FDX Earnings Q4 20

FedEx already warned in March that it expected “weak global economic conditions will be exacerbated” in the fourth quarter, and analysts didn’t anticipate the fourth quarter would show impressive results.

Amazon FedEx Conflict

Last year FedEx dropped Amazon twice and after a compromise Amazon severed deals with FDX. In June FedEx Express cut its US business with Amazon and then in August FedEx Ground also cut its ties with Amazon. The stock fell hard on the news as it impacted earnings further. Then Amazon just a few days before Christmas Amazon played the dirty divorce card on FedEx, lets see how FedEx moves on from here.

Amazon’s moved into its very own delivery capabilities. Amazon's third-party sellers made up 58% of its total merchandise sales which were were put on a told they they will temporarily be restricted from using FedEx’s ground and home delivery for Prime orders prior to FedEx earning. The latest news puts a dot at the end of that statement.

Outlook 

No guidance was issued by FedEx for FY21. Looking ahead, FedEx say it will continue to manage network capacity, making adjustments as needed to align with volumes and operating conditions.

FedEx indicates that it also remain focused on last-mile optimization, including the continued rollout of the FedEx Express initiative to utilize FedEx Ground for the transport and delivery of select day-definite FedEx Express residential packages within the U.S. FedEx Ground will complete the integration of FedEx SmartPost packages into standard FedEx Ground operations by peak season. Capital expenditures for FY21 are targeted to be  $4.9 billion, $1 billion less than the year before.

FedEx said "reduced vehicle replacement spending and delayed facility investments" were the primary drivers behind this. “We have reduced our planned capital spending where possible and have taken actions to mitigate the impact of the pandemic,” said FedEx CFO Alan Graf. “While the near-term outlook is unclear, we expect to benefit from the global recovery as we leverage the strength of our unmatched air network and U.S. residential capabilities, our yield management efforts and multiple initiatives to improve our financial performance.”

Sources: FedEx, AlphaStreet

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