FedEx Corp. (FDX) - Get Report shares surged to near two-year high Wednesday after the package delivery group posted stronger-than-expected first quarter earnings and said it was working on a plan to help distribute coronavirus vaccine treatments to governments and hospitals around the world.
FedEx said adjusted earnings for the three months ending in August, the group's fiscal first quarter, were pegged at $4.87 per share, up 60% from the same period last year and well ahead of the Street consensus forecast of $2.69 per share. Group revenues, FedEx said, rose 13.5% to $19 billion, thanks in part to big gains in it ground shipping business, which moves products for e-commerce giants such as Amazon AMZN and Walmart WMT.
Lower fuel costs helped improve margins at FedEx Freight, which saw a 9% decline in shipments but an operating margin of 15%, while FedEx Ground said volumes surged by nearly a third compared to last year.
FedEx also said it was launching what it calls FedEx SenseAware ID, an enhanced tracking and security censor it says will be a "critical feature to the anticipated vaccine distribution efforts."
"Keeping the world connected in good times and during periods of great need is who we are and what we do every day," CEO Fred Smith told investors on a conference call late Tuesday. "With safety as our first priority, we have worked tirelessly to keep the world's industrial, healthcare and at-home supply chains flowing during the pandemic."
"Detailed planning is under way at FedEx to distribute vaccines at scale worldwide once approved," he added. "Our earnings growth underscores the importance of our business initiatives and investments over the last several years. In many ways, the world has accelerated to meet our strategies and we remain very confident in the future of FedEx."
FedEx shares were marked 5% higher in early trading Wednesday to change hands at $249.21 each, the highest in nearly two years and a move that extends the stock's year-to-date gain to around 71%.
"FedEx reported its second consecutive blowout quarter, with two more likely to come as COVID and related e-commerce strength drives FedEx’s two most important businesses: International Priority and US domestic Ground, over easy year-on-year comps," said Loop Capital analyst Rick Paterson, who carries a buy rating on the stock with a $372.00 price target.
"The FedEX investment thesis, which has been and to a degree remains the company’s adaptation to a world of greater e-commerce adoption, is also becoming more simple and arguably more compelling as we look into calendar 2021 and 2022," he added. "FedEx (UPS, and DHL) could well be the primary global transportation networks for the COVID-19 vaccines, assuming of course they’re developed as currently expected."