FedEx reported better-than-expected results after a bumper holiday shipping season. That was in spite of inclement weather affecting several operations during the period, and the rollout of vaccines allowing shoppers to venture out into public retail spaces again.
Revenue gained 23% to $21.50 billion in the year-ago quarter thanks to strong volume growth in the domestic residential package delivery business and international shipping services divisions.
Poor weather conditions in February cost the company $350 million in operating income. This was after hubs, including its primary FedEx Express hub in Memphis, Tennessee, and hubs in Indianapolis and North Texas were affected. Adjusted Operating income increased 119.5% to $1.06 billion, with the operating margin at 4.7%. Operating results improved primarily due to strong volume growth in US domestic residential packaging, FedEx International Priority services, as well as pricing initiatives across all transportation segments. These factors were partially offset by costs to support stronger demand and expand services, bonuses, higher labour costs, and one less operating weekday in the period.
FedEx saw adjusted net income jump a remarkable 153% to $939 million, or $3.47 per share, from the same quarter a year ago. The company said the profits and revenue were unprecedented and expects demand for e-commerce and international express solutions to remain very high for the foreseeable future. This bodes well for the logistics operator which has seen demand buoyed by stay-at-home orders during the pandemic crisis.
Fedex also looks set to benefit from the vaccine rollout, as a key player in the vaccine distribution efforts. It has already begun delivering the Johnson & Johnson vaccine, and expects a significant uptick in volume in the coming months. It is also gearing-up to ship other Covid-19 vaccines globally, as other manufacturers receive approvals for medicines which have greater temperature ranges and varying dosages.
Cash and cash equivalents jumped 81.44% to $8.85 billion at the end of the fiscal third quarter. The delivery giant is forecasting earnings of $16.80 to $17.40 per diluted share before the fiscal 2021 year-end. Capital spending estimates, of $5.7 billion, are up from the prior forecast due to changes in the timing of aircraft payments and the acceleration of FedEx Ground capacity expansion initiatives.
Fedex is an exceptionally well-run business which has benefitted tremendously from Covid-19 tailwinds. The business is highly specialized with thin margins, and faces tough competition. We are holders of Amazon.com instead in the Cratos BCI worldwide Equity Fund.