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How is FedEx's (FDX) Ground Unit Likely to Fare in Q2 Earnings?
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FedEx Corporation’s (FDX - Free Report) Ground segment, which accounts for more than 30% of its total revenues and around 59% of its operating income, is expected to be boosted by higher revenues when FDX reports second-quarter fiscal 2022 results (quarter ended Nov 30, 2021). This is FDX’s second-largest revenue-generating unit after the Express division.
FedEx Ground offers a low-cost, day-certain service to any business address in the United States and Canada besides residential delivery in the United States through its FedEx Home Delivery service.
Highlights of FedEx Ground’s Q1 Performance
FedEx Ground revenues increased 9% year over year to $7,677 million in the fiscal first quarter owing to higher revenues per package apart from an uptick in commercial packages. Operating income came in at $671 million, decreasing 20% year over year. Segmental operating results were hurt by escalated labor costs and network inefficiencies stemming from staffing shortages. Operating results were also affected by higher expansion-related expenses.
Labor Scarcity Likely to Have Hurt Ground’s Q2 Performance
Supply-chain disruptions are likely to have dented the operating performance of the Ground unit of FedEx in the fiscal second quarter as well akin to the fiscal first quarter. The Zacks Consensus Estimate for operating income at the Ground unit for the to-be-reported quarter is currently pegged at $507 million, indicating a sequential decrease of 47.8%. Escalated labor costs and staffing scarcity-led inefficiencies apart from high expansion-related expenses are likely to have induced this downside. Per Raj Subramaniam, FDX’s president, chief operating officer and director said, "Overcoming staffing and retention challenges is our utmost priority'.
E-commerce Growth Likely to Have Boosted Revenues
Despite the likely impact of the above-mentioned headwinds, e-commerce growth is likely to have aided the segment’s revenues in the to-be-reported quarter. Notwithstanding the economy reopening as opposed to last year, online shopping continues to be a favorite among consumers. The Zacks Consensus Estimate for revenues in the fiscal second quarter at the FedEx Ground unit, which handles e-commerce deliveries for many retailers, stands at $7,898 million, indicating a sequential increase of 2.9%. Uptick in revenue per package is also likely to have boosted revenues. The consensus mark for second-quarter revenue per package at the Ground unit currently indicates an 8.5% increase from the year-ago quarter’s reported figure.
Overall Earnings & Revenue Projections
The Zacks Consensus Estimate for earnings of FedEx in the fiscal second quarter is currently pegged at $4.23 per share, suggesting a 12.4% decrease from the prior-year quarter’s reported figure. For quarterly sales, the consensus mark of $22.53 billion suggests a rise of 9.57% from the year-earlier quarter’s reported number.
While high labor costs are likely to be reflected in the Ground segment’s results for the fiscal second quarter, soaring package volumes, led by e-commerce growth, are expected to have boosted revenues of FedEx Ground.
Let’s take a look at some other transportation companies, top lines of which benefited from e-commerce growth in their recent earnings releases.
Akin to the last few quarters, upbeat e-commerce demand boosted United Parcel Service’s (UPS - Free Report) third-quarter 2021 results. UPS raised shipping prices on the back of buoyant e-commerce demand.
United Parcel Service, currently carrying a Zacks Rank of 3, reported third-quarter 2021 earnings (excluding 6 cents from non-recurring items) of $2.71 per share, beating the Zacks Consensus Estimate of $2.52. The bottom line jumped 18.9% year over year with strong performances across all segments. Quarterly revenues of $23,184 million also outperformed the Zacks Consensus Estimate of $22,612.2 million. The top line increased 9.2% year over year, driven by upbeat demand for e-commerce-related package deliveries.
Atlas Air Worldwide Holdings is the parent company of Atlas Air and Polar Air Cargo, which together operate a fleet of freighter aircraft. AAWW is supported by strong demand for air freight amid the coronavirus pandemic. The boom in e-commerce trends amid the current scenario is a catalyst. AAWW currently sports a Zacks Rank #1.
Atlas Air’s third-quarter earnings (excluding 97 cents from non-recurring items) of $4.88 per share outperformed the Zacks Consensus Estimate of $4.12. Driven by solid e-commerce demand, AAWW reported revenues of $1,016.1 million, outpacing the Zacks Consensus Estimate of $999.7 million. Per AAWW’s president and CEO John W. Dietrich, “Our strategic focus on express, e-commerce and fast-growing global markets is driving robust demand for our services and producing strong financial performance.”
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How is FedEx's (FDX) Ground Unit Likely to Fare in Q2 Earnings?
FedEx Corporation’s (FDX - Free Report) Ground segment, which accounts for more than 30% of its total revenues and around 59% of its operating income, is expected to be boosted by higher revenues when FDX reports second-quarter fiscal 2022 results (quarter ended Nov 30, 2021). This is FDX’s second-largest revenue-generating unit after the Express division.
FedEx Ground offers a low-cost, day-certain service to any business address in the United States and Canada besides residential delivery in the United States through its FedEx Home Delivery service.
Highlights of FedEx Ground’s Q1 Performance
FedEx Ground revenues increased 9% year over year to $7,677 million in the fiscal first quarter owing to higher revenues per package apart from an uptick in commercial packages. Operating income came in at $671 million, decreasing 20% year over year. Segmental operating results were hurt by escalated labor costs and network inefficiencies stemming from staffing shortages. Operating results were also affected by higher expansion-related expenses.
Labor Scarcity Likely to Have Hurt Ground’s Q2 Performance
Supply-chain disruptions are likely to have dented the operating performance of the Ground unit of FedEx in the fiscal second quarter as well akin to the fiscal first quarter. The Zacks Consensus Estimate for operating income at the Ground unit for the to-be-reported quarter is currently pegged at $507 million, indicating a sequential decrease of 47.8%. Escalated labor costs and staffing scarcity-led inefficiencies apart from high expansion-related expenses are likely to have induced this downside. Per Raj Subramaniam, FDX’s president, chief operating officer and director said, "Overcoming staffing and retention challenges is our utmost priority'.
E-commerce Growth Likely to Have Boosted Revenues
Despite the likely impact of the above-mentioned headwinds, e-commerce growth is likely to have aided the segment’s revenues in the to-be-reported quarter. Notwithstanding the economy reopening as opposed to last year, online shopping continues to be a favorite among consumers. The Zacks Consensus Estimate for revenues in the fiscal second quarter at the FedEx Ground unit, which handles e-commerce deliveries for many retailers, stands at $7,898 million, indicating a sequential increase of 2.9%. Uptick in revenue per package is also likely to have boosted revenues. The consensus mark for second-quarter revenue per package at the Ground unit currently indicates an 8.5% increase from the year-ago quarter’s reported figure.
Overall Earnings & Revenue Projections
The Zacks Consensus Estimate for earnings of FedEx in the fiscal second quarter is currently pegged at $4.23 per share, suggesting a 12.4% decrease from the prior-year quarter’s reported figure. For quarterly sales, the consensus mark of $22.53 billion suggests a rise of 9.57% from the year-earlier quarter’s reported number.
FedEx currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our Take
While high labor costs are likely to be reflected in the Ground segment’s results for the fiscal second quarter, soaring package volumes, led by e-commerce growth, are expected to have boosted revenues of FedEx Ground.
Let’s take a look at some other transportation companies, top lines of which benefited from e-commerce growth in their recent earnings releases.
Akin to the last few quarters, upbeat e-commerce demand boosted United Parcel Service’s (UPS - Free Report) third-quarter 2021 results. UPS raised shipping prices on the back of buoyant e-commerce demand.
United Parcel Service, currently carrying a Zacks Rank of 3, reported third-quarter 2021 earnings (excluding 6 cents from non-recurring items) of $2.71 per share, beating the Zacks Consensus Estimate of $2.52. The bottom line jumped 18.9% year over year with strong performances across all segments. Quarterly revenues of $23,184 million also outperformed the Zacks Consensus Estimate of $22,612.2 million. The top line increased 9.2% year over year, driven by upbeat demand for e-commerce-related package deliveries.
Atlas Air Worldwide Holdings is the parent company of Atlas Air and Polar Air Cargo, which together operate a fleet of freighter aircraft. AAWW is supported by strong demand for air freight amid the coronavirus pandemic. The boom in e-commerce trends amid the current scenario is a catalyst. AAWW currently sports a Zacks Rank #1.
Atlas Air’s third-quarter earnings (excluding 97 cents from non-recurring items) of $4.88 per share outperformed the Zacks Consensus Estimate of $4.12. Driven by solid e-commerce demand, AAWW reported revenues of $1,016.1 million, outpacing the Zacks Consensus Estimate of $999.7 million. Per AAWW’s president and CEO John W. Dietrich, “Our strategic focus on express, e-commerce and fast-growing global markets is driving robust demand for our services and producing strong financial performance.”