FedEx Set to Take On Amazon Ahead of Online Giant’s Q4 Earnings Report

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by Teuta Franjkovic · 4 min read
FedEx Set to Take On Amazon Ahead of Online Giant’s Q4 Earnings Report
Photo: bmJi / Flickr

It seems that FedEx Corp. is looking beyond Inc. for growth in e-commerce because they’ve just introduced a new late-night shipping option for retailers who want to speedily send orders directly to online customers.

The program will offer retailers the option to deliver items the next day when they are purchased online as late as midnight, said Brie Carere, FedEx’s chief marketing officer. Less than 1.3 percent of the courier’s total revenue comes from Amazon, she said – a figure that hasn’t previously been disclosed. The company doesn’t expect that to increase as it sees better prospects in helping customers compete against the e-retailing behemoth.

Carere said:

“We are not dependent on Amazon for growth. We’re very optimistic and very, very confident in the growth of the market outside of Amazon.”

She also added that FedEx sees $550 billion in potential sales in the global markets they’re targeting.

So if is serious about getting into transport business, “buying” option might just be much more attractive than “building”.

Loop Capital analyst Anthony Chukumba says that Amazon’s ultimate distribution goals are limited, but aims to reduce its reliance on and provide leverage with incumbent shippers such as UPS and FedEx. He also notes that both FedEx and UPS have downplayed the risks and that they are on a “slippery slope” that may lead to price wars if Amazon continues to expand.

A deal would see Amazon get “the best global network for a fraction of the cost of building it themselves,” a point FedEx CEO made recently at a meeting, Chukumba says., Inc. is obviously not being FedEx Corporation’s largest customer. FedEx spokesperson said in the interview that while there has been significant media interest in what Amazon is doing to expand their in-source delivery capability, this should not be confused as competition with FedEx.

He said:

“The global infrastructure, the technology, the capabilities and the knowledge needed to compete in our business is quite extraordinary, and we have built that up over 40-plus years.”

FedEX CEO: “I Doubt Amazon Will Ever Be Our Competition”

Package couriers face a rising threat from Amazon — which is also one of their biggest customers — as the online giant has begun expanding its own delivery capabilities by leasing aircraft and hiring independent contractors to establish a ground-delivery network.

Online sales now make up about 15 percent of U.S. retail, and are growing at three times the pace of traditional brick-and-mortar.

Just to mention, last month FedEx Chief Executive Frederick Smith said how he thinks that Amazon is a “wonderful company” and it is a “good customer” of FedEx, but he doesn’t see it as a peer competitor at this time, and for many reasons, he doubts it ever will be.

He ended his answer with a mic drop:

“So I don’t know what I can say other than what I just said. I think the prospects that this company is going to be “disrupted,” which just occurs over and over again, to quote a previous statement, is fantastical. So I’ll leave it at that.”

Waiting for the Amazon’s Q4 Earnings Announcement, Doors “Open For a Miss”

However, we shouldn’t forget that Inc. is scheduled to report fourth-quarter earnings on Thursday after the closing bell and SunTrust Robinson Humphrey analysts warn the e-commerce giant has a patchy track record with holiday quarter estimates.

Analysts there expect a “solid” fourth-quarter report, but leave the door open for a miss.

They said:

“History shows that Amazon has had limited success in exceeding Street expectations for revenue in 4Q, likely due to the lack of visibility at the time guidance is given, and difficulties in forecasting a high amount of sales volume in such a small window.”

Wall Street analysts are predicting that Amazon.Com Inc will report earnings per share of $5.67 in their quarterly report. For the current quarter Amazon.Com Inc has high EPS estimates of $8.27 in contradiction of low EPS estimates of $4.37. However a year ago for the same quarter the company has reported $2.16 EPS. Average estimation for the current quarter has been provided by 45 analysts.

Investors as well as the sell-side will be paying close attention to how the actual numbers compare with the estimates. Earnings surprises can have a huge impact on a company’s stock price. Several studies suggest that positive earnings surprises not only lead to an immediate hike in a stock’s price, but also to a gradual increase over time.

Hence, it’s not surprising that some companies are known for routinely beating earning projections. A negative earnings surprise will usually result in a decline in share price.

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