Delivering Results, Absolutely & Positively this Holidays
It’s that time of the year when you receive an “out for delivery” alert today, only for your shipment to be delivered two days later! And it’s also the time of the year when you place a gift order for your in-laws just a day before Christmas and blame FedEx/UPS for not delivering on time.
The holiday delivery rush is a fascinating decade-old phenomenon, thanks to ever-increasing online shopping model. One can literally see the American Economy in motion. And FedEx, in typical holiday style, cheered Wall St. yesterday with its quarterly earnings that were up 11%. And if not for the cyber-attack at its recently acquired TNT Express, the results could have been even better.
But what caught our attention while listening to their earnings call yesterday was the fact that FedEx is having a great holiday season versus UPS that had delivery glitches right after Thanksgiving. Fred Smith, FedEx’s CEO, while answering analysts’ quipped — “I want to reemphasize that our great service is because of the outstanding long-term planning and having facilities in place. We’ve been off a little bit sometimes but not much, but boy, we had it right this year so far, knock on wood.”
FedEx posted revenues of $9.35Bil in the FedEx Express segment, up 8% compared to 2Q17. Revenues in the FedEx Ground segment rose 12% to $4.93Bil. In FedEx Freight, revenues grew 10% to $1.76Bil from last year. With a planned shipping rate increase of 4.9% starting January 2018, across Express, Ground, and Freight, expect revenues to go even higher in the next year with the economy expected to be in an upswing.
The U.S. GDP could increase materially next year as a result of U.S. tax reform. FedEx is estimating its EPS to increase by $4.40 to $5.50 per share if the US government enacts the Tax Cuts and Jobs Act.
During the call, one analyst did ask the million dollar question — how will FedEx be impacted if Amazon starts competing for shipping business? While Fred Smith skirted the question saying he won’t address “hypotheticals”, the company’s Marketing Chief Raj Subramaniam chimed in saying Amazon is a long-standing customer and that they represent not more than 3% of revenue or volume.
