Memphis-based global freight transportation and logistics services provider FedEx posted solid fiscal first quarter earnings results late yesterday.
Revenue—at $20.6 billion—was up 16% annually, and operating income—at $1.47 billion—well outpaced the $554 million recorded for the same period a year ago. The company’s quarterly net income on an adjusted basis—at $1.23 billion—topped the $560 million recorded for the same quarter last year. Adjusted earnings per share—at $4.15—was ahead of the $2.13 per share, from a year ago, and beat Wall Street expectations, of $4.01 per share.
FedEx pointed to higher operating results paced by volume gains for its FedEx International Priority and U.S. domestic residential package services for all of its transportation segments, which were offset by costs supporting strong demand and to expand services, and COVID-19-related costs, among other factors.
“Let me first thank our FedEx team, nearly 600,000 strong,” said FedEx Chairman and CEO Fred Smith on the company’s earnings call. “These team members have continued to keep the world moving amid the pandemic, transporting medicines, protective gear and all the things our customers need for daily life and all of our B2B customers need to run their industries. And now, our team is acting on months of rigorous planning to transport COVID-19 vaccines safely and on time, we have no higher priority as a company. Time-definite Express transportation of critical shipments is exactly what our air and ground network was built to do. And we have the experience, unmatched global network and technology solutions needed to effectively play our role in helping to eradicate this awful disease.”
FedEx Express revenue rose 12% annually, to $10.368 billion, with operating income, at $900 million, climbing 74% annually. FedEx Ground revenue, at $7.344 billion, saw a 28% annual increase, with the segment’s operating income up 39%, to $552 million. Revenue for FedEx Freight, its less-than-truckload segment, rose 5%, to $1.936 billion, and operating income increased 45%, to $252 million.
Total quarterly package revenue, at $8.025 billion, was up 11% annually. And total U.S. package revenue, at $3.651 billion, saw a 10% annual gain, with total international export package revenue up 15%, to $3.168 billion, and international domestic up 3%, to $1.206 billion.
Total daily U.S. domestic package volume increased 15%, to 3.304 million and U.S. revenue per package, at $17.54, was up 13%. Total daily international export packages at 1.044 million outpaced the 880 million per day a year ago.
Average weight per shipment, for FedEx Freight, at 1,079 pounds, slipped 1%, with average revenue per shipment, at $278.66, up 3%. Total shipments per day—at 110,979—edged out the 110,015 moved a year ago, for the same period.
Brie Carrere, FedEx EVP, Chief Marketing and Communications Officer, said on the call that due to the ongoing impact of the pandemic and its third surge in many countries, the near-term economic outlook remains unclear, while in the U.S., goods spending is above pre-pandemic levels, due, in large part, to e-commerce gains.
“We’re also seeing growth beyond the consumer as drivers of business activity are increasingly in place,” she said. “Inventory restocking and a strong recovery in capital goods spending are supporting industrial production. Positive developments on the vaccine front should strengthen the appetite for investment. However, the service sector does remain challenged and faces short-term uncertainty against the latest virus surge. When the health emergency ends and pent-up services demand is released, we should see a long growth runway.”
And she added that the acceleration of e-commerce has had a profound impact on the market, as proven by the 2020 holiday shipping season, with the pandemic accelerating the growth of e-commerce volumes, as e-commerce package volumes are expected to more than triple to 111 million packages per day by 2026, up from 35 million in 2019.
FedEx President and COO Raj Subramaniam said on the call that the company achieved volume, yield and significant profit growth in each of its transportation segments this quarter.
“These results were largely driven by many of the strategic investments and decisions we have put in place over the last 18 months to address the growing e-commerce market,” he said. “These include expanding the U.S. Ground residential delivery to every day of the week; integrating SmartPost package volumes into the Ground network to improve density; investing in technologies that enable real-time decisions and optimize the critical last mile; building our network’s capabilities and expanding services to more efficiently handle an increase in large items; and accelerating the expansion of our retail convenience network, the Dollar General, Walgreens, and of course, our own FedEx office locations.”
And he added that these initiatives increase density, improve last mile efficiency and help us prepare for the peak season.
Jerry Hempstead, president of Orlando, Fla.-based Hempstead Consulting, said that When it comes to the parcel industry COVID-19 has provided a carrier windfall.
“If you can’t make money in this environment …. all the carrier networks are full, including FedEx and this has caused pricing opportunities never seen before,” he said. “Both domestic and international carrier yields are way up. So, the good news for FedEx today was horrible news for shippers. Higher costs looking forward for the[shipper]. All segments of FedEx were operating well, and they predict these volumes out at least a year even with the vaccines being distributed. There is an old adage in parcel—’I would rather be lucky than smart.’ Well, in this quarter, FedEx capitalized on its abundant luck. I’m sure we will see similar results from UPS when they announce their Q4 earnings in about six weeks.”
About the Author
Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman