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Pandemic-Induced Delivery Demand Pushes FedEx To Beat Forecast

Pandemic-Induced Delivery Demand Pushes FedEx To Beat Forecast
An increase in the volume of deliveries because of the pandemic induced deliveries for e-commerce companies during the holiday shopping season as well as higher prices helped the United States based delivery firm FedEx Corp to report better than expected quarterly profits, the company said.
Compared to their price a year ago, the share price of the company has more than doubled. It was about a year ago quarter that governments across the world were forced to shut down businesses and issue stay at home orders. 
Following the announcement by FedEx founder and Chief Executive Frederick Smith of his expectations of the demand for e-commerce and international express services remaining “remain very high for the foreseeable future", there was an almost 4 per cent jump in the stocks of the company.
There was a 153 per cent jump in the adjusted net income of the Memphis-based company for its fiscal third quarter compared to the same period a year ago to $939 million, or $3.47 per share, which very comfortably beat expectations of analysts of $3.23 per share, according to data from Refinitiv.
There was as 23 per cent jump in revenues earned by the company for the quarter ended February 28 to $21.5 billion which was primarily driven by more than half billion package deliveries during the holiday season as well as because of shipments related to the Covid-19 pandemic online shopping.
This result was achieved by the company despite severe winter weather in February which disrupted service at important facilities in Memphis, Indianapolis and North Texas, as well as a reduction of quarterly operating income by about $350 million.
After the pandemic hit the high margin shipments of delivery companies between businesses while also resulting in a great surge of deliveries of online orders, including bulky items such as exercise bikes and sofas, FedEx as well as its rival United Parcel Service increased prices for sheltering profits.
The company said that there was a 25 per cent hike in the average daily package volume for FedEx Ground, which also includes deliveries for Walmart’s e-commerce shipping orders, to 13.2 million during the quarter. There was also am 11 per cent increase in the company’s revenue per package to $9.72.
The company assumed gain in margins in all of its business segments and forecast its full year adjusted earnings per share of $17.60 to $18.20. that forecast was also better than the average expectations of analysts at Wall street of $17.40, according to Refinitiv.
In the near future, the roll out of Covid-19 vaccines will bring a section of the customers back to the stores which would result in softening of e-commerce volume in the short run, said the company’s marketing chief Brie Carere.
"However, we are very confident that e-commerce as a percentage of retail has a long growth runway," Carere said on a web cast.

Christopher J. Mitchell

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