01 July 2020

FedEx Delivers Q4 Beat on Ecommerce Growth

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News shaping
the markets today

     

What’s happening: Shares of FedEx Corporation jumped around 9% in extended trading on Tuesday after the US package carrier reported stronger-than-expected results for its fourth quarter.

What happened: Despite the coronavirus outbreak hurting FedEx’s results, the Memphis, Tennessee-based company managed to exceed the consensus estimates on the back of a rise in online shopping.

On the other hand, FedEx suffered from a steep decline in commercial volumes during the quarter due to business closures globally.

How were the results: Although sales declined, the deliveries and logistics giant reported a narrower loss for the quarter.

  • Sales slipped to $17.4 billion, from $17.8 billion in the same quarter a year earlier, but came in ahead of the estimates of $16.4 billion.
  • FedEx recorded losses of $334 million, or $1.28 per share, a loss of $1.97 billion, or $7.56 per share, in the year-ago quarter.
  • Excluding one-time items, FedEx earned $2.53 per share. Although this represented a steep decline from the year-ago figure of $5.01 per share, it surpassed the consensus view of $1.58 per share.

Why it matters: Business closures amid the pandemic squeezed FedEx’s business and the bottom-line results. Although residential ecommerce deliveries spiked during the quarter, these have a significantly lower margin than commercial deliveries, where the size of packages are typically much larger and a higher number of packages are delivered to a single location.

FedEx’s domestic residential volume grew by a whopping 72% during the quarter. FedEx Ground, which handles the majority of ecommerce residential deliveries, generated 20% revenue growth. Despite this, operating income of the unit slipped 17%.

FedEx Express, which mostly delivers commercial packages, reported a 10% decline in revenues and a 56% decrease in operating income.

The company’s operating costs rose by approximately $125 million due to “personal protective equipment and medical/safety supplies, as well as additional security and cleaning services to protect our team members and ensure we are safely providing essential services for our customers,” FedEx said in a statement.

Management refrained from issuing a profit outlook for fiscal 2020 citing uncertainty of the timing of an economic rebound.

How shares responded: FedEx’s shares rose 8.8% to $152.50 in after-hours trading following the release of strong quarterly results. The stock has added around 13% over the past three months.

What to watch: A further rise in FedEx’s shares is expected to provide support to indices trading this morning, as the stock is a component of both S&P 500 and Dow Jones index. Investors will look out for any news of an economic rebound and a recovery in FedEx’s commercial deliveries.

The Markets Today

     

Gold trading will be in focus today, after the yellow metal topped $1,800 in the previous session.

Context: Gold futures climbed on Tuesday to their highest close since 2011, as a resurgence of coronavirus cases pushed investors towards the safe-haven metal.

Details: With covid-19 cases rising in Texas, Florida, Arizona and California, concerns around a delay in the economic rebound have started to haunt investors.

Gold futures climbed more than 18% in the first six months of the year, with a 13% gain in the second quarter.

August gold rose 1.1% to end the day at $1,800.50 an ounce on Tuesday, marking the highest finish for the metal since September 2011.

Meanwhile, September silver gained 0.6% to settle at $18.637 an ounce in the prior session. The white metal has risen 4% in the first half of this year, climbing approximately 32% in the recently ended quarter.

In other metals, October platinum climbed 2.8% to $851.20 an ounce, adding 13% for the year. September palladium gained 1.8% to reach $1,966.90 an ounce, up by about 3% in the first half of the year.

What to watch: Investors await various economic reports from the US in addition to the minutes from the Federal Reserve’s latest meeting. Any data indicating a slowdown in the economic rebound will support the safe-haven metal. Gold prices are expected to remain elevated in today’s session, with the continued rise in covid-19 cases. Gold futures traded higher by 0.1% to $1,803 an ounce in European session.

Other Markets: European indices were trading mixed at 8:30am GMT, with the FTSE 100 and French 40 down by 0.1% and 0.3%, respectively, and the Dax 30 index and the Stoxx Europe 600 rising by 0.6% and 0.2%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UAE’s inflation rate as well as the US MBA mortgage applications, Challenger job cuts, ADP employment change, manufacturing PMI, construction spending, ISM manufacturing PMI and FOMC minutes.