FedEx Profit Guidance Eases Holiday Season Worries
Market Posts 'Relief Rally' for UPS, FedEx
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FedEx Corp. expects profit this quarter to improve from a year ago, easing investor concerns about a lackluster holiday season and volatile trade policies.
Adjusted earnings in its fiscal second quarter, which concludes at the end of November, will surpass the $4.05 a share the courier generated last year, Chief Financial Officer John Dietrich told investors Nov. 11 at an industry conference. Analysts are anticipating $4.02 a share on average in estimates compiled by Bloomberg.
The comments sent FedEx shares up 5.3% as of 1:38 p.m. in New York. Rival UPS Inc. climbed as well.
“What you’re seeing right now clearly is something of a relief rally when people have been pretty negative on the prospects for both FedEx and UPS,” said Ari Rosa, an analyst at Citigroup Inc. “That reflects a lot of challenges that these companies have faced over the last 12 to 24 months.”
The package-delivery industry has been grappling with uncertain demand ahead of the peak shipping season and rising costs from President Donald Trump’s tariffs. FedEx and UPS are also expected to encounter disruptions and higher expenses from the grounding of their MD-11 aircraft following the fatal crash last week of a UPS freighter.
The grounding could be more of a burden for UPS, with the plane type accounting for about 9% of its total fleet, according to filings. The MD-11 represents about 4% of FedEx’s fleet.
The latest developments are pushing the couriers to turn to third-party charters to maintain operations, writes Brian Ossenbeck, an analyst at JP Morgan Securities. The outsourcing is likely to lead to higher costs for the companies, especially as increased demand could push up air freight rates.
“Protecting service during peak comes at a cost,” Ossenbeck wrote in a note.
FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers, No. 3 on the TT Top 50 list of the largest global freight carriers and No. 43 on the TT Top 100 list of the largest logistics companies in North America.
UPS ranks No. 1 on the TT100 for-hire list, No. 5 on the logistics list and No. 2 on the global freight list.
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