E-commerce companies around the world reporting significant increases in online revenue. As such, it should come to no-one’s surprise that many delivery companies around the world have also seen a significant increase in sales as well. Most notably, FedEx (NYSE: FDX) ended up impressing investors with a surge in second-quarter revenue, well beyond what most analysts were expecting.
FedEx went on to say on Tuesday that the company saw ‘Christmas-like’ levels on online shopping over the past couple of months, something that has helped boost business substantially. Total revenue came in at $17.4 billion, well above the $16.8 billion consensus target that Wall Street was expecting.
“We have reduced our planned capital spending where possible and have taken actions to mitigate the impact of the pandemic,” said Alan B. Graf, FedEx’s CFO. “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.”
The company went on to say that 72% of all shipments in the U.S. it had delivered this quarter went to residences. That’s a significant increase from the 56% reported one year ago, with the remaining deliveries going to commercial rather than residential areas. FedEx’s ground unit saw a 20% increase in revenue during this quarter, while the average daily shipping volume is up around 25% in contrast to last year. Although FedEx confirmed that it wouldn’t be providing an earnings forecast for its fiscal 2021 year. This is due to the unpredictability of the coronavirus pandemic, even though revenues have grown significantly precisely due to this situation.
FedEx saw a significant increase in health-related equipment and supplements during this time, something which makes sense given the nature of the pandemic. The company also said that it managed to keep costs in line thanks to a number of factors. This included a drop in fuel costs, due largely to the decline in oil prices. Before the full extent of the pandemic was made clear, FedEx made sure to extend service to seven days a week, a move that helped reduce the logistical strain of the surge of deliveries that were needed during the height of the lock down.
Shares of FedEx shot up by 4.2% on Tuesday, with the stock rising an extra 10% in after-hours trading. While good news for the $36 billion market cap delivery giant, shares still are a little below where they were before the coronavirus pandemic broke out. However, it’s expected that business will continue to remain strong for the delivery giant as many wondered whether further coronavirus outbreaks would take place in the upcoming months.
FedEx Company Profile
FedEx pioneered overnight delivery in 1973 and remains the world’s largest express delivery firm. In fiscal 2018, FedEx derived about 55% of its $65 billion top line from its express division, 28% of sales from Ground, and 10% from its Freight less-than-truckload trucking segment. FedEx Office provides document production and shipping services, and Trade Networks offers freight forwarding. FedEx acquired the Dutch parcel delivery firm, TNT Express, in 2016. – Warrior Trading News
