FedEx Corp. (FDX, Financial) released its fiscal third quarter 2021 results on March 18 after the market closed.
The logistics giant posted an earnings and revenue beat owing to an increase in domestic and international deliveries in the wake of the Covid-19 pandemic. In addition, solid online ordering during the holiday season bolstered the company's quarterly results.
Shares were down 0.6% to $264.36 in after-hours trading on Thursday following the results.
Key metrics
The Memphis, Tennessee-based company posted adjusted earnings of $3.47 per share, which were up from $1.41 in the prior-year quarter. Revenue for the same period came in at $21.51 billion, up from $17.5 billion reported last year. Analysts had anticipated earnings of $3.23 per share on $19.97 billion in revenue.
Chairman and CEO Frederick W. Smith commented on the company's performance:
"As reflected in this quarter's results, continued execution of our strategies is producing strong earnings growth and margin improvement across our company. We expect demand for our unmatched e-commerce and international express solutions to remain very high for the foreseeable future."
Residential shipments increase while business-to-business shipments decline
The Coronavirus pandemic caused a spike in online shopping, which is why resident shipments surged during the quarter. However, business-to-consumer shipments are less lucrative for FedEx when compared with business-to-business shipments, which involves comparatively less miles per route and more packages per stop.
Currently, the courier company is focusing on reducing costs associated with residential delivery. The company is making investments in automated sorting centers and route optimization to counter higher-cost residential delivery.
How FedEx's business units fared
FedEx Ground revenue per package climbed 11% to $9.72 for the quarter. The growth was attributable to a rise in online orders on account of the pandemic. In addition, ground's average daily package volume amounted to 13.2 million, which jumped 25% as compared to the year-ago quarter. Thanks to these tailwinds, ground's margin surged from 6.1% recorded in the year-ago quarter to 8.8%.
FedEx Express, which handles more commercial deliveries, saw revenue increase 20.9% to $10.79 billion. Likewise, operating income stood at $463 million in the third quarter, which was an improvement from $137 million reported in the third quarter of the previous year. Average daily package volume inched up 12% on a year-over-year basis. The segment's air shipping services is witnessing increased demand, especially for international shipments.
Looking forward
Going forward, the company expects the commercial business to rebound when the effects of the pandemic begin to ease, which will help boost commercial deliveries. However, FedEx's ground business, which manages e-commerce deliveries, will continue to experience growth in the long term. E-commerce shipments are expected to reach 111 million parcels per day in 2020, which is thrice the shipment volume in 2019.
For fiscal year 2020, the company is expecting diluted earnings to be around $16.80 to $17.40 per share before the year-end MTM (mark-to-market) retirement plan accounting adjustment and debt refinancing costs. Capital spending is anticipated to be $5.7 billion, which is higher than the $5.1 billion forecasted previously due to the impending expenses associated with FedEx Ground capacity expansion.
Disclosure: I do not hold any positions in the stocks mentioned.
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