9 months ago • 2 mins
FedEx delivered investors a care package of tasty quarterly results late last week.
What does this mean?
FedEx was doing prodigious business back in the dark pandemic days, what with all the yoga mats, breadmakers, and board games folks were ordering. But deliveries have taken a hit since then, and households’ increasing focus on services instead of goods hasn’t helped matters. That’s got the logistics giant zeroing in on what it can control: costs. See, the company's made good progress on its $4 billion cost-cutting plan – closing offices, cutting flights, and nixing Sunday deliveries in far-off areas. It’s also upped its pricing game, with the biggest hike in FedEx history earlier this year. That helped the firm rake in more cash per package in every segment last quarter. So even though FedEx didn't quite hit its revenue goals, it still managed to shoot past profit expectations.
Why should I care?
For markets: Not mailing it in.
FedEx has a good feeling about its future, with some more cost cuts in the cards and a hunch that deliveries will pick up too. That could be why its annual profit forecast was way stronger than expected. And if the firm plays its cards right, it could even start threatening its less bloated rival UPS – whose profit margins tend to be much higher on the whole. Investors are backing FedEx anyway: its stock has outperformed UPS’s by 19%, and the S&P 500 by 24%, so far this year.
Zooming out: Feeling a-freight.
FedEx is clearly making strides in some areas, but logistics demand is weak right now, and that’s unlikely to change much until the economic outlook does. Uber’s also feeling the pinch: rumor has it the firm’s thinking about selling off its freight logistics division, a move that would actually make a lot of sense. After all, auctioning off that sideshow would let Uber concentrate on ride-hailing and food delivery – its real flywheel.
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