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The global impact of the coronavirus pandemic took a toll on fiscal third-quarter results for FedEx Corp.
The Memphis, Tenn.-based carrier announced March 17 that year-over-year quarterly net income fell 57% to $315 million, or $1.20 a share, compared with $739 million, or $2.80 a share, in the same period a year ago.
However, Q3 revenue rose 3%, to $17.5 billion from $17 billion a year ago, making it the company’s best-ever Q3 revenue result.
FedEx’s quarterly report was mixed when it compared with Wall Street’s expectations. The consensus estimate of 21 analysts was for revenue of $16.9 billion and EPS of $1.48.
“As we announced last June, FY 20 would be a year of challenge and change, and beginning in early January, the coronavirus entered the picture for FedEx,” CEO Fred Smith said during a conference call with reporters and analysts after the market closed. “As was the case in Asia, our FedEx team members in Europe and the Americas are dealing with this crisis competently and with much dedication.”
The company also announced that it has suspended its full-year outlook.
“We are suspending our fiscal 2020 earnings forecast for our consolidated and segment results due to the uncertainty caused by the coronavirus pandemic,” Chief Financial Officer Alan Graf said.
The company attributed declines in its operating results to weaker global economic conditions caused by the virus. Beyond that, however, the company cited factors including:
- Higher self-insurance accruals.
- An unfavorable variable incentive compensation comparison.
- Increased FedEx Ground costs from expanded service offerings.
- Loss of business from a large customer.
- A continuing mix shift to lower-yielding services.
- A more competitive pricing environment.
FedEx did note, however, that as factories in China and other Asian nations begin to ramp up as the COVID-19 pandemic eases there, its freight airline will be in a strong position to claim business from passenger airlines that are cutting flights. Those airlines transport hundreds of millions of packages a year in the cargo hold of jets crossing the oceans. Smith noted FedEx flew 246 flights in and out of China in just the past week.
Chief Operating Officer Raj Subramaniam said that is considered a regular schedule.
“Over the past couple of weeks, our flights have been full, and we have registered record load factors intra-Asia,” he said.
But he added that demand is softening in Europe as several nations impose lockdowns and curfews to battle the virus.
Among FedEx’s various operating units, one stood out: FedEx Ground reported $5.84 billion in revenue compared with $5.26 billion in the same quarter a year ago. FedEx Freight saw a slight dip, to $1.74 billion compared with $1.75 billion last year, and FedEx Express saw revenue decline to $8.94 billion compared with $9 billion a year ago.
“FedEx continues to be committed to delivering long-term profitable growth,” Subramaniam said. “We have successfully weathered global crises before, and in the near term, we are focused on supporting our employees, communities and customers as we work through the coronavirus situation.”
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