U.S. carton delivery company FedEx suspended its 2020 profit outlook on Tuesday, citing the “significant impact” of the coronavirus, and commanded it would cut costs due to the uncertainty wrought by the pandemic.
Even so, the company reported quarterly revenue that beat store expectations as more businesses turned to its international express plane service to safeguard their supply chains as COVID-19 bugs and deaths mount around the world.
Shares in FedEx surged as much as 5% before falling 0.5% to $94.50 in after-the-bell craft.
A woman walks past FedEx Corp. Ground vehicle parked in the Midtown neighborhood of New York, U.S., on Friday, Dec. 4, 2015.
John Taggart | Bloomberg | Getty Figures
“The reaction to their release is a bit like driving looking through the rear-view window,” said Trip Miller, run partner at Memphis-based Gullane Capital Partners. “There wasn’t much in there for me to feel positive about FedEx or anybody else in the next 60 days.”
FedEx abutted Denmark’s DSV Panalpina, a major transportation and logistics provider, in suspending profit forecasts due to unprecedented business disruption from the virus.
FedEx, which benefited from President Donald Trump’s corporate tax cut, submitted a beg to the U.S. government for “liquidity support,” Chief Financial Officer Alan Graf said on a conference call with analysts.
The encase delivery company’s adjusted net income dropped 53.5% year-over-year to $371 million, or $1.41 per share, for the fiscal third favour ended Feb. 29. Revenue rose about 3% to $17.5 billion.
Analysts on average expected earnings of $1.41 per part and revenue of $16.89 billion, according to Refinitiv IBES data.
The company — whose rivals include United Set apportion Service and Amazon’s homegrown delivery operation — was grappling with the integration of its TNT Express unit, higher costs reciprocal to launching Sunday home delivery, and the loss of Amazon.com as a customer before the deadly virus outbreak began.
Principals see opportunity in surging e-commerce spending as governments in Europe and the United States urge people to hunker down at habitation to reduce the spread of the virus. Rampant international passenger flight cancellations already have been a boon for the lucrative make known business at FedEx, they said.
“It’s like Christmas right now on the express side. They’re moving all sorts of reserves and equipment,” said Dean Maciuba, a director at Logistics Trends & Insights.
FedEx is attacking costs by restructuring the band to move more express packages through its ground network, Maciuba said. But it still lags UPS, whose assembled express and ground network is more efficient.
“I do believe it’s a turnaround story, but it’s going to take forever,” said Maciuba, summing that it could take up to three years to get FedEx margins back to 7-8% from less than 3% today.
Miller, of Gullane Outstanding, noted that FedEx’s stock is trading at roughly the same level as 15 years ago. “The top 5 executives, plus the accommodate, have made $870 million over the last 15 years, while shareholders have made nothing,” he rephrased.