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FedEx's (FDX) Q1 Earnings Beat Massively, Shares Increase

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FedEx Corporation’s (FDX - Free Report) shares popped 8.3% in after-hours trading on Sep 15, following its robust first-quarter fiscal 2021 (ended Aug 31, 2020) performance.

The company’s earnings (excluding 14 cents from non-recurring items) of $4.87 per share handsomely surpassed the Zacks Consensus Estimate of $2.59. Moreover, the bottom line surged approximately 60% year over year, driven by increased volumes at FedEx International Priority and U.S. domestic residential-package services, as well as yield improvement at FedEx Ground and FedEx Freight. Moreover, benefits from an additional operating day contributed approximately $130 million to first-quarter fiscal 2021 performance.

Quarterly revenues of $19,321 million outperformed the Zacks Consensus Estimate of $17,459.4 million and increased 13.3% year over year, primarily owing to increased demand for e-commerce as coronavirus restricts people to their homes. Operating income (on an adjusted basis) soared 56.2% year over year to $1.64 billion in the reported quarter due to international export and U.S. domestic-package volume growth at FedEx Express, higher residential volumes at  FedEx Ground andyield improvement at FedEx Ground and FedEx Freight. Operating margin (adjusted) also improved to 8.5% from 6.1% in the year-ago period.

FedEx Corporation Price, Consensus and EPS Surprise

FedEx Corporation Price, Consensus and EPS Surprise

FedEx Corporation price-consensus-eps-surprise-chart | FedEx Corporation Quote

Segmental Performance

Quarterly revenues at FedEx Express (including TNT Express) ascended 8% to $9,647 million due to international export and U.S. domestic-package volume growth. Segmental operating income (adjusted) increased to $747 million from $342 million in the year-ago period.  Also, segmental operating margin (on an adjusted basis) improved to 7.7% from 3.8% in first-quarter fiscal 2020.

FedEx Ground revenues surged 36% year over year to $7,040 million in the period under consideration owing to residential-delivery volume growth. Operating income came in at $834 million, augmenting 30% year over year. However, segmental operating margin dipped to 11.8% from 12.4% in the prior-year quarter.

FedEx Freight revenues declined 4% year over year to $1,826 million due to fall in average daily shipments. However, the segment’s operating income soared 41% to $274 million, thanks to focus on revenue qualitative initiatives and cost-reduction measures. Moreover, operating margin increased to 15% from 10.2% in the year-ago quarter.

Outlook

FedEx anticipates capital expenditures of $5.1 billion in fiscal 2021, compared with $4.9 billion expected previously. The anticipated increase in capital spending is due to initiatives to increase capacity in response to growing volumes.

The company is expected to incur TNT Express-integration expenses of approximately $1.7 billion through fiscal 2022. In the remainder of fiscal 2021, the company expects to incur approximately $125 million of integration expenses.

Zacks Rank & Key Picks

FedEx carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Knight-Swift Transportation Holdings Inc (KNX - Free Report) , Landstar System Inc (LSTR - Free Report) and Canadian Pacific Railway Limited (CP - Free Report) . While Canadian Pacific carries a Zacks Rank #2 (Buy), Knight-Swift and Landstar sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Knight-Swift, Landstar and Canadian Pacific have rallied more than 22%, 13% and 20% respectively so far this year.

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