FedEx (NYSE: FDX) topped analysts' estimates for earnings and sales due to the coronavirus leading to the increased volume of deliveries as consumers increase ecommerce spending. However, FedEx's shares dropped lower, finishing the day 5% down, as the company didn't provide guidance for 2021 due to uncertainty around the pandemic and costs.
Inside the Numbers
For its fiscal second-quarter, it earned $4.83 per share on revenue of $20.6 billion. This handily topped estimates as analysts were looking for $4.01 per share and $19.5 billion in revenue. Package deliveries increased by 29% to 12.3 million with revenue per package increasing 7% to $9.24.
Comparing FedEx's 2020 Q2 results to 2019's Q2 shows how much it's benefited due to the pandemic. Last year, it earned $2.51 in the quarter on $17 billion in revenue.
Stock Price Outlook
FedEx has recently been in the spotlight as the company is playing a key role in the vaccine's distribution as part of Operation Warp Speed. The vaccine needs to be kept at cool temperatures. While this is a demonstration of the company's logistical expertise, it won't likely have a meaningful impact on its bottom-line. However, there is some concern that holiday deliveries could be complicated by these efforts. Already, orders for online sellers like Walmart (NYSE: WMT) or Amazon (Nasdaq: AMZN) are showing delays for many items due to the "surge" of online shopping.
Ultimately, these are "good" problems to have for Fedex. As a result of the coronavirus, it's stock is up 90% on the year. However, it's possible that the end of the pandemic could mark a top which would explain the stock price's weakness following a strong earnings report. Stocks tend to top on positive news, when it becomes priced in.
A successful vaccine being distributed means that some of the extreme-trends of the past year will reverse. As a result, it's likely that spending in physical retail stores explodes while ecommerce spending pulls back.
Just like FedEx's strong earnings report was an indication that a short-term top may be in, weakness on a temporary dip in ecommerce sales would likely be an excellent entry point for long-term investors. Ecommerce will continue to take an increased market share in the long-term, although this will have probably peaked due to the pandemic's effects.