FedEx Corp. jumped after Chief Executive Officer Fred Smith said the courier was ready to handle increased demand as the coronavirus outbreak crimps freight capacity at airlines.
FedEx abandoned its 2020 financial forecast, citing uncertainty caused by the pandemic.
Key Insights
The dramatic drop in commercial airline flights is leading to “significant reductions in intercontinental air capacity,” Smith said. That’s because many long-distance jetliners carry cargo in their holds as well as passengers in their cabins. FedEx, which is still flying, said it was well positioned to help customers manage their supply chains.
Still, the unprecedented global travel bans and business closures from the virus have set back FedEx’s efforts to improve earnings and boost its shares. Sales at Express air-cargo unit, which accounts for more than half of revenue, were little changed in the fiscal third quarter, which ran through February.
The U.S. ground operation benefited from a move to seven-day delivery, more holiday volume than a year earlier, and a preference for online rather than in-store shopping in the early days of the crisis. Ground sales rose 11 per cent in the quarter. Operating profit at both the Ground division and the Express operation fell.
Third-quarter adjusted earnings fell to US$1.41, the Memphis, Tennessee-based company reported. That beat the US$1.27 average of analyst estimates compiled by Bloomberg.
Market Reaction
The shares advanced 2.7 per cent to US$97.50 after the close of regular trading in New York. FedEx has dropped 37 per cent this year, while rival United Parcel Service Inc. fell 17 per cent and the S&P 500 industrials index dropped 29 per cent.
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