FedEx Explodes on Profit Cleanup

FedEx (NYSE:FDX) reported a bigger-than-expected quarterly profit on Tuesday, after price hikes, lower fuel costs and efficiency gains countered negative impacts associated with a pandemic-fueled surge in e-commerce shipments.

Average daily package volume for FedEx Ground, which handles e-commerce deliveries for retailers like Walmart (NYSE:WMT), jumped 31% to 11.6 million during the fiscal first quarter ended Aug. 31. Revenue per package rose 2% to $9.33 during the quarter, which also included one additional business day.

Covid-19 disrupted operations at FedEx and rival United Parcel Service (NYSE:UPS). Lucrative deliveries to businesses dried up and higher-cost residential deliveries boomed as workers sheltered at home and placed online orders for everything from office furniture and exercise equipment to snacks and pet food.

Home deliveries traditionally have been more expensive because they involved fewer packages and far-flung stops. Rising volumes and investments in things like automated sorting centers and route optimization are bringing those costs down.

FedEx spent $565 million on fuel across the company during the quarter, 35% less than a year earlier.

FedEx did not provide an earnings forecast for fiscal 2021, citing continued uncertainty, but said it expects annual capital spending of $5.1 billion, above analysts’ average estimate of $4.96 billion, according to Refinitiv data.

Fiscal first quarter adjusted net income at FedEx jumped 60% to $1.28 billion, or $4.87 per share.

Revenue rose 13.5% to $19.3 billion.

Analysts expected earnings of $2.69 per share and revenue of $17.55 billion.

Shares in the Memphis-based company leaped $10.21, or 4.3% to $246.88, in early Wednesday trading.