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Ecommerce supports FedEx’s positive performance

September 17, 2014

FedEx's financial results reflect that ecommerce is giving the company a healthy boost to their already solid business operations.

FedEx’s financial results reflect that ecommerce is giving the company a healthy boost to their already solid business operations. The company’s first quarter net income grew by 24 percent to $606 million for the period ending August 31, up from $489 million one year earlier. FedEx’s performance beat analyst expectations, which estimated earnings per share at $1.96 a share. Actual earnings per share amounted to $2.10.

FedEx’s revenue was bolstered by growth in online shopping, which requires physical products to be delivered via ground shipments. The added volume of shipments translated to company revenue climbing 6 percent to $11.68 billion. Revenue increases were also attributable to solid performance in the company’s freight division as well as healthy growth in volume at FedEx Express, reported Bloomberg.

Increased sales due to holiday season
It is expected that the company will experience continued increased sales in the coming holiday period due to the rise in online consumer sales from Thanksgiving and Christmas. Michael Glenn, executive vice president at FedEx, said that the company would be adding upwards of 50,000 seasonal workers to accommodate for the rise in sales and shipping, reported Reuters.

FedEx has been in an “active dialogue with our retail and E-tail customers all year to understand their peak shipping needs and plan our operations accordingly,” Glenn said.

First quarter results for the company were made public one day after FedEx announced that it would be increasing its U.S. rates for express, ground and home-delivery shipments, in January, by an average of 4.9 percent. The company announced that it would also introduce new pricing that places more emphasis upon dimensions of packages, in addition to weight, for the lightweight parcel category.

Christian Wetherbee, analyst at Citigroup, informed investors that the company looked strong and would produce very positive results during the most important time of the year, reported Reuters.

“Coupled with solid general rate increases announced last night…FedEx appears well positioned in the competitive landscape to outperform through the peak season,” wrote Wetherbee.

In response to positive earnings reports, signs of growth in the industry, positive expectations for the coming period and the announcement of rises in shipping rates, shares of FedEx rose by 2.7 percent and the share value went up by $4.15 to $158.81 in premarket trading.

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