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FedEx (FDX) Shares Fall Despite Q2 Earnings & Revenues Beat

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FedEx Corporation (FDX - Free Report) reported robust second-quarter fiscal 2021 results as it thrives on the pandemic-driven rise in e-commerce demand. Despite the strong show, the company has been skeptical about issuing guidance for fiscal 2021 as economic uncertainty continues. This skepticism perhaps weighed on investor sentiments, causing shares of the company to decline 3.6% in after-hours trading on Dec 17, despite the outperformance in the fiscal second quarter.

FedEx’s earnings (excluding 28 cents from non-recurring items) of $4.83 per share beat the Zacks Consensus Estimate of $3.90. Moreover, the bottom line surged 92.4% year over year, driven by increased volumes at FedEx International Priority and U.S. domestic residential package services, as well as pricing initiatives across all transportation segments.

Quarterly revenues of $20,563 million outperformed the Zacks Consensus Estimate of $19,326.7 million and increased 18.7% 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 more than 100% year over year to $1.51 billion in the reported quarter due to pandemic-driven rise in demand for residential delivery services as well as higher demand for business-to-business delivery services.  Operating margin (adjusted) also improved to 7.4% from 3.9% 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 14.1% to $10.37 billion due to international export and U.S. domestic-package volume growth. Segmental operating income (adjusted) increased to $943 million from $351 million in the year-ago period. Also, segmental operating margin (on an adjusted basis) improved to 9.1% from 3.9% in second-quarter fiscal 2020.

FedEx Ground revenues surged 38.2% year over year to $7,344 million in the period under consideration owing to residential delivery volume growth. Operating income came in at $552 million, augmenting 61.4% year over year. Segmental operating margin also improved to 7.5% from 6.4% in the prior-year quarter.

FedEx Freight revenues climbed approximately 5% year over year to $1.94 billion due to higher revenue per shipment. The segment’s operating income ascended 78.7% to $252 million, thanks to focus on revenue qualitative initiatives. Moreover, operating margin increased to 13% from 7.6% in the year-ago quarter.

Outlook

FedEx continues to expect capital expenditures of $5.1 billion in fiscal 2021. Anticipating increased demand for its services, the company expects earnings growth in the second half of fiscal 2021.

The company estimates TNT Express-integration expenses of approximately $80 million in the remainder of 2021. Additionally, it expects to incur integration expenses of approximately $1.7 billion through fiscal 2022.

Zacks Rank & Key Picks

FedEx carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Landstar System (LSTR - Free Report) , United Parcel Service (UPS - Free Report) and GATX Corporation (GATX - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Landstar, UPS and GATX have gained 21%, 62% and 33% in the last six months, respectively.

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