When package-deliverer FedEx Corp. reports its third-quarter earnings on Thursday, the results won’t just be about the state of shipping. They’ll be about all the state of people and businesses that still want it, after e-commerce demand cooled off last year and FedEx FDX,
The company will report alongside several retailers and software names — like Adobe Inc. and Gitlab Inc. — as the collapse of SVB Financial Group SIVB,
FedEx in recent months has called out a “weaker demand environment” and an “e-commerce reset” that has weighed on sales. Even so, the company has raised shipping prices this year, and is still extracting more money out of each delivery — helped by extra fees that offset fuel costs — even as shipping volumes fade. As part of an effort to save money, FedEx has grounded jets and cut back on flights and ground-service routes, and said it would close some locations that offer copying and printing services.
As FedEx tries to lower expenses, investors, ever focused on profit, have come around. Shares have rebounded since September.
But analysts will be focused on concrete details. TD Cowen analyst Helane Becker, in a research note on Friday, said she would be focused on signs of progress surrounding FedEx’s cost-cutting campaign. She said that she’d also be looking for updates on where volumes, pricing and e-commerce demand were headed.
“As the economy has reopened, we have seen a decline in online ordering,” she said. “We are wondering if there has been any change in the outlook.”
Other analysts said they would also be watching for any specifics on FedEx’s efforts to cut costs.
“Part of our constructive view on FedEx is the catalyst path through and beyond earnings,” Citi analyst Christian Wetherbee said in a research note this week.
“While we think meeting/beating estimates is a key to the story in order to build credibility, we also see a detailed walk through the next $4b of cost reductions and potentially some preview/pull forward of Network 2.0 as further positive catalysts near-term.”
Analysts at Wolfe Research said FedEx had room to cut more deeply.
“Parcel pricing remains solid, we see market share opportunities for FDX this year, and with lots to fix, the company’s cost reductions feel increasingly structural to us with potential for even more,” they said. “So, FDX feels like a unique story in transports right now with trough EPS already behind us, and with significant EPS upside potential in F25.”
Some analysts were more cautious on the broader freight industry. Both the shipping and software industries have seen demand wane over the past year, after the e-commerce boom from COVID-19’s quarantine in 2020 and 2021 gave way to pent-up demand for travel and entertainment, and price increases for basics. After unwanted clothing, appliances and electronics piled up in retailers’ stockrooms, store chains — after cutting prices to sell off much of that surplus — are staying cautious to keep investors happy.
“Retailers seem unlikely to shift from de-stocking to re-stocking near-term, with no ‘tale of two halves’ pitches like in transports,” Bascome Majors, a Susquehanna Financial analyst who covers logistics and trucking, said in a note this month. “We remain cautious toward freight volumes and pricing into 2Q.”
This Week In Earnings
Elsewhere during the week, Buzzfeed Inc. BZFD,
The calls to put on your calendar
Software earnings: Media-software designer Adobe ADBE,
The numbers to watch
Parsing the benefits and drawbacks in discount retail: Dollar General Corp. DG,
Meanwhile, teen-centric discounter Five Below Inc. FIVE,