A driver for an independent contractor to FedEx Corp. pushes a cart with packages for delivery in New York, U.S., on Monday, Nov. 26, 2018.
Christopher Lee | Bloomberg | Getty Images
Shares of FedEx jumped 9.4% in extended trading on Tuesday after a surge in pandemic-fueled home deliveries helped the U.S. package carrier post better-than-expected quarterly profit and revenue.
Adjusted profit at Memphis-based FedEx fell by almost 50% to $663 million, or $2.53 per share, for the quarter ended May 31. Revenue slipped to $17.4 billion from $17.8 billion a year earlier.
Analysts, on average, expected a profit of $1.52 per share on revenue of $16.4 billion, according to Refinitiv IBES data.
FedEx said the novel coronavirus pandemic, which is leaving a trail of human and economic damage in its wake, hit virtually all of the company’s revenue and expense line items. Executives declined to provide an earnings forecast for fiscal 2020, citing the uncertain timing and pace of an economic recovery.
FedEx is grappling with a flood of coronavirus-related e-commerce shipments as it rebuilds from its split with Amazon.com, a major customer, and the costly integration of TNT Express in Europe.
Business closures and a profound shift to online shopping are squeezing profits at FedEx and rival United Parcel Service. Residential e-commerce deliveries, which involve more miles per route and fewer packages per stop, are less lucrative than business deliveries where drivers leave anywhere from a handful to hundreds of pieces at each location.
FedEx total U.S. domestic residential volume was 72% for the fourth quarter, versus 56% a year earlier, FedEx Chief Marketing Officer Brie Carere said on a conference call with analysts
“Profitability doesn’t necessarily improve when you’re sending more packages to far-flung places,” Edward Jones analyst Matt Arnold said of home deliveries.
FedEx Ground, which handles more e-commerce home deliveries, reported a 20% revenue increase for the quarter and a 17% drop in operating income.
Revenue at FedEx Express, which skews toward commercial deliveries, fell 10% and operating income dropped 56%.
FedEx executives said they were attacking residential delivery costs as business-to-business shipments begin to show signs of recovery.
FedEx shares, which hit a record high of almost $250 in October 2017, were up $13.20 at $153.30 in after-hours trading on Tuesday.