After a surge in deliveries of health equipment and an efficiency drive aimed at home deliveries, FedEx Corp's earnings rallied beyond the expectations of Wall Street market observers.
The courier disclosed that with a mix of job cuts, reduced incentive compensation, aircraft retirements, and delays on some investment projects, it held costs in check. Those actions and a drop in fuel costs helped cushion the $125 million needed to protect workers against the COVID-19 pandemic, FedEx said in a statement Tuesday as it reported earnings for the three months ending May 31.
In the quarter FedEx posted a loss of $334 million, or $1.28 per share, compared to a loss of $1.97 billion, or $7.56 per share, in the previous quarter last year. Adjusted for one-time events, the group received $663 million, or $2.53 per share, compared to $5.01 a year earlier. The sales decreased slightly from $17.8 billion a year ago to $17.4 billion.
Analysts surveyed by FactSet had expected the company to report $1.58 a share of adjusted earnings on $16.4 billion of sales. The COVID-19 pandemic severely affected the quarter, Chief Executive Frederick W. Smith disclosed in a statement.
However, with many US residents sticking close to home, online shopping has climbed, and this has helped push up sales for FedEx's ground distribution operations by 20 percent.
But deliveries to consumer homes are more costly and not as lucrative as deliveries between companies, which have dropped sharply since the start of the pandemic as companies shut down.
Revenue in the main express distribution unit of FedEx dropped by 10 percent and operating revenue retreated by 55 percent. There were also several bright spots. The Express device has seen an upsurge in Pacific flights.
FedEx refused to offer details on the sales for the fiscal year 2021. But capital spending is seen at $4.9 billion, a decrease of $1 billion from this year, largely due to decreased spending on vehicle replacement and delayed investment in facilities.
According to chief financial officer Alan Graf, while the company's near-term forecast is unclear, they estimate to take advantage of the global rebound "as we leverage the strength of our unmatched air network and US residential capabilities... and multiple initiatives to improve our financial performance," Aparna Narayanan of Investor's Business Daily, reported.
The ongoing global health crisis added another challenge for the Memphis-headquartered logistics empire this year, a period that company executives stated would be a year of major transition. The pandemic led to COVID-19 cases and fatalities among FedEx workers. It also triggered a drop in business-to-business volume and an increase in home shipments.