FedEx Corporation reported its Q42020 earnings on 30th June 2020. Sales dropped marginally from $17.8 billion in Q42019 to $17.4 billion in Q42020. The revenues, however, were higher than FactSet’s estimates of $16.4 billion. The company also reported a net profit of $2.53 per share. Analyst expectations for net profit were around $1.52 per share.
Commercial Fedex shipping volumes were significantly down due to the effects of the pandemic. However, FedEx ground shipping volumes were up as residential deliveries drove the segment. There was also a surge in transpacific and charter flights at FedEx Express.
FedEx incurred an additional $125 million in costs due to PPE equipment, medical supplies, and cleaning services for its employees. FedEx also received a tax benefit of $71 million as part of the provisions of the CARES Act.
According to Brie Carere, Executive Vice-President, FedEx, “The COVID pandemic has accelerated e-commerce adoption, while detrimentally affecting the business-to-business segment. Several years of retail share gains have been compressed into a few months in the United States with e-commerce as a percentage of U.S. retail increasing from 16% in calendar year ’19 to 27% in April 2020.”
He further added, “Surging e-commerce sales from our large customers drove significant FedEx volume in Q4 and a sizable mix shift from commercial B2B to Home Delivery/B2C volume. In Q4, FedEx’s total U.S. domestic residential volume was 72% versus 56% a year ago.”
FedEx has been facing some challenges with a split from its major customer Amazon, the costly integration of TNT Express in Europe, and now the pandemic-led downturn. However, the forecast-beating earnings results have given its investors a reason to feel optimistic.
FedEx stock rose by more than 3% on 1st July 2020 to close at $140.22. It has been up 8.1% in the past one month.