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The continued yearlong surge in e-commerce brought on by the COVID-19 pandemic sent FedEx’s year-over-year fiscal third-quarter net revenue up 23% to $21.5 billion, compared with $17.4 billion in the same period in 2020.
FedEx has now topped $20 billion in revenue in two consecutive quarters, the only times the Memphis, Tenn.-based carrier has reached that mark in its 50-year history.
FedEx operates on a fiscal year cycle, and its third quarter ended on Feb. 28.
The company’s net income rose 183% year-over-year to $892 million on $3.30 a share, compared with $315 million, $1.20, in 2020.
“I’m exceedingly proud of our FedEx team members, who are moving the world forward through the delivery of COVID-19 vaccines — the most important work in the history of FedEx,” said FedEx CEO Frederick Smith. “As reflected in this quarter’s results, continued execution of our strategies is producing strong earnings growth and margin improvement across our company. We expect demand for our unmatched e-commerce and international express solutions to remain very high for the foreseeable future.”
The results exceeded Wall Street’s expectations. FedEx’s adjusted earnings per share of $3.47 topped the average estimate of eight analysts by Zacks Investment Research of $3.21 a share.
The revenue estimates also beat expectations. The financial data company FactSet said before the earnings announcement it expected quarterly revenue of $19.96 billion.
FedEx Chief Financial Officer Michael Lenz said the December holiday shopping season set a record as the carrier saw a 25% year-over-year jump to 13.2 million packages moved in its FedEx Ground unit, which handles most of its e-commerce deliveries and the bulk of its holiday shopping orders. FedEx counts Walmart as one of its largest e-commerce customers. Revenue per package increased 11% to $9.72.
“The significant improvement in our third-quarter results highlights the momentum in our business which continued through an unprecedented peak season,” Lenz said. “Our growth in fiscal 2021 has identified opportunities for investments that further position us for sustained long-term growth in earnings and cash flows as we move into fiscal 2022 and beyond.”
Company officials say now that American and international consumers have experienced e-commerce purchasing at the level they have because of the COVID-19 pandemic, they expect the growth will continue for years to come.
“In the United States, we are seeing strong growth and momentum,” FedEx Executive Vice President for Marketing Brie Carere said. “The U.S. domestic parcel market is expected to grow to 101 million packages a day by calendar year 2022, with e-commerce contributing 86% of total U.S. market growth. Some of our largest retail customers reported e-commerce growth rates in the high double and even triple digits in 2020. We are very confident that e-commerce as a percentage of retail has a long runway.”
Broken down by business segments, revenue for FedEx Express rose 21% to $10.78 billion from $8.92 billion in the same period a year ago. The unit’s operating income jumped a whopping 238% to $463 million from $137 million in the third quarter of FY 2020.
FedEx Ground Q3 revenue jumped by 37% year-over-year to $7.98 billion, compared with $5.84 billion. Operating income also increased 98% to $702 million from $355 million.
“We remain very optimistic about continued profitable growth at Ground,” FedEx President Rajesh Subramaniam said.
The company’s less-than-truckload division revenue for FedEx Freight increased 6% to $1.83 billion from nearly $1.74 billion in 2020. The freight segment’s operating income increased 5% to $119 million from $113 million in 2020.
On an earnings call with reporters and financial analysts, company officials said severe winter weather during February reduced the quarter’s operating income by an estimated $350 million. The winter weather impaired operations at several of the company’s largest facilities, including the primary FedEx Express hub in Memphis and FedEx Express hubs in Indianapolis and North Texas.
“If you take February out, our fundamentals look a lot like they did in January. It was February revenue that was down. But we feel very confident about the fundamentals in March,” Carere said.
FedEx is at the forefront of moving the COVID-19 vaccine, along with Atlanta-based UPS Inc. FedEx says it is prepared to scale up to accommodate anticipated growth in vaccine volume throughout the spring and summer.
“Our global network is moving COVID-19 vaccines and ingredients and supplies even as we speak,” Subramaniam said. “It has been a coordinated orchestration of our physical and digital capabilities. This is some of the most important work that we have done, and to do the work, it requires a network, and only a couple of companies have that network. We are extremely proud of this work.”
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