FedEx Flexes Pricing Muscle as Pandemic Drives E-Commerce Surge
FedEx Corp. is riding a wave of e-commerce demand that’s boosting its pricing power to a degree not seen in the parcel industry in years, helping strengthen the courier’s profit amid the coronavirus pandemic. The shares jumped.
- Adjusted operating margin rose to 8.5% in the period ending Aug. 31 from 6.1% a year earlier, FedEx said in a statement Tuesday.
Key Insights
- Surcharges of 30 cents more per package for its largest customers and a nascent recovery in more profitable business deliveries helped the courier offset the extra costs of operating during a pandemic. FedEx wrung out efficiencies from its spending on new aircraft and automation to handle online shipping demand.
- The company is getting an early payoff on investments in its Ground unit that have made home deliveries more profitable. Improvements include expanding deliveries to seven days a week and taking back parcels that used to be handed to the U.S. Postal.
- FedEx’s Express unit benefited from a rebound in air cargo and the steep decline in passenger flights, which often carried cargo at lower rates. The courier also made up for revenue it lost after parting ways with Amazon.com Inc., with sales rising 13% to $19.3 billion. Analysts had expected $17.55 billion.
Market Reaction
- FedEx surged 6.2% to $251.32 in after-hours trading. Shares had gained 57% this year through Tuesday, far outpacing a 5.3% increase in the Standard & Poor’s 500 Index.
Get More
- Adjusted earnings were $4.87 a share, higher than the highest estimate compiled by Bloomberg. Analysts had predicted $2.69.
- Additional details.
Source: Read Full Article