FedEx Corp. surged as a wave of e-commerce demand bolstered pricing power and propelled earnings amid the coronavirus pandemic.
Sales at the ground-delivery unit jumped 36 per cent to US$7 billion and operating margins rose to 11.8 per cent, the highest in a year, FedEx said in a statement Tuesday. That helped push the courier’s total earnings beyond Wall Street’s highest estimate in the fiscal quarter ending Aug. 31.
FedEx is cashing in surcharges for big customers that are making home deliveries more profitable after years in which residential shipments weighed on margins. Like rival United Parcel Service Inc., which dazzled Wall Street with its results less than two months ago, FedEx is getting an early payoff on investments to boost efficiency and automation to handle demand spurred by the rise of online shopping.
“Our earnings growth underscores the importance of our business initiatives and investments over the last several years,” FedEx Chief Executive Officer Fred Smith, said in the statement. “In many ways, the world has accelerated to meet our strategies.”
FedEx surged 9.4 per cent to US$259 after the close of regular trading in New York. Shares had gained 57 per cent this year through Tuesday, outpacing UPS’s 38 per cent advance and a 5.3 per cent increase in the Standard & Poor’s 500 Index.
An additional surcharge of 30 cents a package for large customers is helping FedEx offset the extra costs of operating during the pandemic. Higher pricing pushed package yields to an increase of 2.2 per cent, reversing declines in the previous three quarters.
At the Express air-cargo unit, revenue rose 7.8 per cent to US$9.65 billion. Operating margins more than doubled to 7.4 per cent from a year earlier, showing more signs of pricing strength.
The gains helped FedEx make up for revenue it lost after parting ways with Amazon.com Inc. FedEx’s total sales rose 13 per cent to US$19.3 billion. Analysts had expected US$17.55 billion.
Adjusted earnings were US$4.87 a share, topping the highest estimate compiled by Bloomberg. Analysts had predicted US$2.69.