FedEx Corp. FDX released its third-quarter results for fiscal 2020 on March 17 after the market closed. The package delivery company posted better-than-expected revenue, while earnings failed to meet analysts' expectations. The company did not provide a financial forecast due to the global uncertainty caused by the Covid-19 pandemic.
By the numbers
The Memphis, Tennessee-based company posted earnings of $1.20 per share, down from $2.80 reported in the prior-year quarter. Revenue of $17.5 billion inched up 3% on a year-over-year basis. Analysts had predicted earnings of $1.48 per share on $16.9 billion in revenue.
Reflecting on the company’s performance, Chairman and CEO Frederick W. Smith said:
“We continue to deliver for our customers and are ready to support increased demand for our International Express export services due to the significant reductions in intercontinental air capacity. While the global economic impact from recent social-distancing mandates is uncertain, we remain well positioned to assist our customers as they work to manage their supply chains and inventories. We will continue to support efforts to combat the pandemic.”
Cost reduction efforts
Besides the coronavirus, the company cited several other factors that hampered its earnings, such high self-insurance accruals, increased FedEx Ground costs from expanded service, loss of business as well as an aggressive pricing environment. FedEx also witnessed high costs associated with rolling out Sunday home delivery.
To improve its future earnings, the company is adopting various cost-cutting measures. To do so, Chief Financial Officer Alan Graf said, “We are attacking costs throughout the company by managing capacity, retiring our oldest and least-efficient aircraft, integrating TNT Express, and lowering our residential delivery costs by having FedEx Ground deliver FedEx SmartPost and certain day-definite FedEx Express packages."
A few positives
The e-commerce business is projected to grow as both the U.S. and European governments are encouraging people to stay at home so as to mitigate the spread of the virus. Additionally, massive cancellation of passenger flights amid the coronavirus scare has been favorable for FedEx’s express business.
Disclosure: I do not hold any positions in the stocks mentioned.
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