Fedex 2Q profit climbs as deliveries multiply

Fedex Corp. more than doubled its profit in the latest quarter, as holiday packages were being stuffed into delivery trucks alongside everyday goods that people buy online to avoid visiting stores during the pandemic.

The delivery giant said Thursday it earned $1.23 billion in its fiscal second quarter, compared with $560 million a year earlier. Revenue rose 19%.

Fedex declined to forecast future earnings, but Chief Financial Officer Michael Lenz said the company expects earnings to grow over the next six months because of heightened demand for shipping services.

The results beat Wall Street expectations, but Fedex shares, which have nearly doubled this year, fell more than 3% in after-hours trading.

The quarter ended Nov. 30, meaning that the figures reported Thursday captured only the beginning of the peak U.S. delivery period that runs from Thanksgiving through Christmas.

Fedex and rival United Parcel Service have been running at Christmaslike levels for several months already, as the pandemic causes people to do more of their routine shopping online.

Now the delivery giants are adding holiday shipments and deliveries of COVID-19 vaccines, and it is straining their networks.

UPS temporarily halted deliveries for several large retailers around Cyber Monday, the first business day of the week after Thanksgiving. Still, Fedex, UPS and the U.S. Postal Service held up reasonably well early during the holiday season, posting on-time delivery rates of better than 90% through the first week of December, according to data firm Shipmatrix.

Henry Maier, the head of Fedex Ground, said his division has delivered up to 30% of packages a day early and parcels have spent less time in transit – 2.4 days on average – than last year, despite delays in opening new facilities and the challenge of training thousands of package handlers.

In recent years, shoppers have come to count on free shipping – at least from major retailers – and fast deliveries. By limiting shipments that they pick up – by day and even location – Fedex and UPS hope to keep their networks from bogging down, but it could lead to longer delivery schedules and upset consumers. Cowen analyst Helane Becker said Fedex will become more selective with delivery orders to maintain their operation. “The surge in volume is positive for pricing and should result in a record year as long as the network can sustain a relatively consistent operation throughout peak,” Becker told clients in a note last week.

Memphis, Tennessee-based Fedex said Thursday that adjusted to eliminate one-time gains and losses, income equaled $4.83 per share. That easily beat the average forecast of $3.90 per share among nine analysts surveyed by Zacks Investment Research.

Revenue climbed to $20.56 billion, up from $17.32 billion a year earlier and topping the analysts’ prediction of $19.33 billion.