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How Much Will the Coronavirus Hurt FedEx's Sales and Earnings?

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FedEx (FDX - Free Report) is set to report its Q4 fiscal 2020 financial results after the market closes on Tuesday, June 30. Shares of the global shipping powerhouse have jumped 50% since mid-March to outpace its industry and the S&P 500, but they remain beaten down over the last several years as investors worry about competition from the likes of Amazon (AMZN - Free Report) .

Quick FDX Backstory

FedEx stock has fallen over 40% in the last two years as its longer-term earnings outlook plummeted. FDX then shocked investors when it essentially cut ties with Amazon in August 2019. Many on Wall Street thought FDX pulled the plug too early on its relationship.

FDX executives noted at the time that Amazon represented only a small proportion of sales. And FedEx hopes to do what Microsoft (MSFT - Free Report) has done with cloud computing: attract Amazon’s direct rivals, which includes the likes of Walmart (WMT - Free Report) . And the firm is trying to improve its FedEx Express hub automation and modernize its FedEx Express air fleet.

FedEx has also highlighted its plans to attract more e-commerce and business-to-consumer clients, while remaining a B2B-heavy operation. FDX aims to better compete overall against its core competitors United Parcel Service (UPS - Free Report) , DHL, the US Postal Service, and Amazon.

 

 

 

 

 

 

 

 

 

 

 

Coronavirus Impact

FedEx last quarter pulled its guidance amid the broad global uncertainty that brought the economy to as near a halt as many thought possible.

The coronavirus forced many people to stay and home and try to avoid stores for nearly three months in some parts of the country and the world. This put heavy demand on e-commerce and saw digital-channel sales boom at Target (TGT - Free Report) , Kroger (KR - Free Report) , and many other retail giants.

Despite the growth in e-commerce, FedEx and others have been overwhelmed with holiday season volume, which has raised costs. FedEx recently announced that it was introducing surcharges on some shipments to help offset rising costs and perhaps control the flow of packages during the pandemic.

On top of that, FedEx was unable to drop off packages in bulk to many stores deemed non-essential. Worse still, overall business activity declined.

 

 

 

 

 

 

 

 

 

 

Outlook

Our Zacks estimates call for FedEx’s Q4 FY20 sales to sink 8.5% from the year-ago period. For perspective, FDX’s Q2 sales dipped 2.8%, but in order to find its next year-over-year decline you have to go all the way back to fiscal 2010.

Meanwhile, the firm’s adjusted quarterly earnings are projected to plummet 70% to $1.52 per share. FedEx’s Q1 FY21 earnings are then expected to sink 53% on roughly 4% lower sales.

FedEx is currently a Zacks Rank #3 (Hold) and its Q4 and fiscal 2020 and FY21 earnings estimates have fallen recently.

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