16 September 2020

FedEx Delivers Blowout Q1 Results, Shares Rally

Tags

News shaping
the markets today

     

What’s happening: Shares of FedEx Corp surged in extended trading session on Tuesday after the delivery company reported better-than-expected results for its fiscal first quarter.

What happened: FedEx witnessed a surge in its average daily package volume, as the pandemic provided a massive fillip to ecommerce shipments.

With the holiday shopping season approaching, a further acceleration is expected in ecommerce deliveries, resulting in the Memphis-based logistics company imposing holiday fees for the first time since 2016.

How were the results: FedEx reported growth in sales and earnings for its fiscal first quarter, with both metrices surpassing consensus views.

  • Sales climbed to $19.3 billion, from $17 billion in the same quarter last year, exceeding market expectations of $17.6 billion.
  • Earnings came in at $1.25 billion, or $4.72 per share, up from $745 million, or $2.84 per share, in the year-ago quarter.
  • Excluding onetime items, the company’s earnings grew to $4.87 per share, from $3.05 per share last year, meaningfully ahead of the consensus estimate of $2.70 per share.

Why it matters: FedEx Ground, which handles ecommerce deliveries for retailer behemoths like Walmart, recorded 31% growth in average daily package volume to 11.6 million and 2% growth in revenue per package to $9.33.

Sales at the company’s Ground unit surged 36% to $7 billion in the quarter, with operating margins expanding to 11.8%, the highest in a year.

With pandemic-led lockdowns resulting in significant growth in online shopping, shippers stared charging higher rates. FedEx levied an additional surcharge of 30 cents per package for its large Ground clients, which further improved package yields last quarter.

Retailers are expecting a big boom in holiday sales and have started preparing for the season much earlier this year to avoid delays in shipping.

FedEx announced plans to add over 70,000 positions to prepare for the peak delivery season. The company also said it would increase shipping rates by 4.9% on average from January for its FedEx Express, FedEx Ground and FedEx Freight divisions.

Management did not issue an earnings outlook for fiscal 2021 citing covid-19 uncertainty. However, the company lifted its guidance for capital spend by $200 million to $5.1 billion for the year.

How shares responded: Shares of FedEx jumped 8.3% to $256.31 in after-hours trading on Tuesday following the release of quarterly results. The stock has gained a whopping 77% over the past three months.

What to watch: Investors will keep an eye on news related to the arrival of the big shopping season. Also, any increase in fuel costs could exert pressure on the company’s margins.

The Markets Today

     

The EUR/USD will be in focus today, ahead of the interest rate decision from the US Federal Reserve.

Context: The EUR/USD pair rose initially on Tuesday following strong economic data from European but gave up gains later in the session.

Details: Germany reported higher-than-expected ZEW Survey data for September. The ZEW Indicator of Economic Sentiment for the country climbed 5.9 points to 77.4 in September, which was its highest reading since May 2000.

The Economic Sentiment for the Eurozone also surged 9.9 points to 73.9 in September, sending the euro to 1.1900 earlier in the session.

On the other hand, the US released mixed economic data on Tuesday, with the NY Empire State Manufacturing Index surging to 17 in September, surpassing the consensus estimates of 6. However, August industrial production numbers came in weaker-than-expected, rising just 0.4%.

The US session saw the return of some demand for the greenback, sending the EUR/USD pair back to the 1.1847 level. The pair was trading slightly higher at 1.185 during today’s Asian session.

What to watch: Markets await the US Federal Reserve’s interest rate decision, with the central bank widely expected to keep rates unchanged. Investors also await Eurozone’s balance of trade data, with the region’s trade surplus growing to €21.2 billion in June.

Other Markets: European indices trading closed higher on Tuesday, with the FTSE 100, DAX 30 and French 40 rising 1.32%, 0.18% and 0.32%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

South Africa's SACCI business confidence index and retail trade, Canada’s annual inflation rate, Russia’s producer prices, Saudi Arabia’s balance of trade, Argentina’s consumer price index as well as the US mortgage applications, retail sales, NAHB housing market index, business inventories and EIA’s crude oil stockpiles.

ADS Securities London Limited “ADSS” is an execution-only service provider. This material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or investment objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by ADSS that any particular investment, security, transaction or investment strategy is suitable for any specific person. To the extent that any content in this material is construed as investment research, you must note and accept that the content was not prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.  This material may contain links to third party websites, and any content, or use of your personal data by any third party websites is not the responsibility of ADSS or any member of the ADSS Group.