FDX Stock Up 12%, FedEx Reports Strong Quarterly Earnings Despite COVID-19 Crisis

UTC by Bhushan Akolkar · 3 min read
FDX Stock Up 12%, FedEx Reports Strong Quarterly Earnings Despite COVID-19 Crisis
Photo: Depositphotos

FedEx surprises Wall Street with better-than-expected Q2 results despite the coronavirus pandemic strike. The major crash in the company’s B2B services was offset with the strong growth in B2C services.

Global trade received a major setback on account of the coronavirus pandemic during the second quarter of the year. However, American multinational delivery service FedEx Corporation (NYSE: FDX) managed to deliver strong results taking entire Wall Street by a surprise. With better-than-expected results announced on Wednesday, Wall Street investors gave a stock rating upgrade to FedEx Corporation. The stock price of FedEx jumped over 14% during the Wednesday market hours with its best single-day percentage gains after 1986.

FDX closed at $156.66 (+11.72%) yesterday. Today in the pre-market, FedEx stock is 0.10% down.

The Wednesday rally after Fed reported its quarterly earnings on Tuesday after the market hours. The company reported earnings of $2.53 per share on revenue of $17.4 billion easily beating analysts’ expectations of $1.52 per share on sales of $16.5 billion. Wall Street was worried that due to the halt in the business, the consumer deliveries won’t be enough to make up for the loss in business-to-business deliveries.

FedEx Corporation said that the quarter was “severely affected” during the coronavirus pandemic. However, some tweaks to improve profit margins and the surge in consumer business-to-consumer deliveries helped to offset higher costs and other headwinds.

The company said that it had to spend an additional $125 million in operating costs. This includes additional cleaning, PPE, and pandemic-related operations. FedEx CEO Frederick W. Smith said in a statement:

“Though our fiscal fourth-quarter performance was severely affected by the COVID-19 pandemic, I am extremely proud of the herculean efforts of our team members. As a result of the strategic investments we have made to enhance our capabilities and efficiencies, FedEx is well-positioned to support and benefit from the reopening of the global economy.”

Analysts Give Buy Call to FedEx Stock

After solid quarterly results during the pandemic period, JPMorgan, led by Brian Ossenbeck, has raised the FedEx stock rating to a buy. Investors weren’t expecting much from FedEx during these tough times. Last year, the company was not looking in good shape but had invested heavily in its network for 2020 growth.

Analysts say that these investments helped the company overcome its tough times. FedEx’s Express service helped the company overcome the setbacks in its business-to-business deliveries. Similarly, FedEx’s Ground business enjoyed better margins. In a note to investors, analysts with Raymond James wrote that FedEx “will weather the (admittedly) severe impacts from the coronavirus (and) we see limited further downside at current levels, though we are keeping a close eye on the macro”.

Helane Becker at Cowen said that the better margins at FedEx Ground were the core behind its quarterly performance. Also, FedEx saw a rising demand from Asia. “Accelerating macro trends are working in FedEx’s favor, though uncertainty looms with the overall economy,” she said.

With yesterday’s price surge, FedEx stock has overcome all its COVID-19 losses.

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