What’s Going On Here?FedEx announced what analysts were calling “breathtakingly bad” quarterly results late on Tuesday: the shipping giant lowered its full-year profit expectations for the second straight quarter, and its shares fell more than 10%. What Does This Mean?FedEx’s international shipping volumes have been hit by the same trade tensions that’ve impacted many other US companies, sure. But the company has a bigger issue on its plate: the continued rise of e-commerce, which has led to a spike in the number of small, one-off deliveries going to an unprecedented number of different addresses.
FedEx has not only had to invest heavily in its network to be able to meet these new demands, it’s also earning less from them: a single-package delivery, after all, is much less profitable than a business delivery involving multiple large packages. Adding insult to injury, e-commerce giant Amazon has been building its own delivery network – and in doing so, has gone from FedEx customer to FedEx competitor. Why Should I Care?For markets: Courier advice.
FedEx is down over 5% this year – all the tougher to swallow considering its biggest rival, United Parcel Service (UPS), is up more than 20%. UPS has invested billions in managing the influx of e-commerce parcels, helping it take advantage of FedEx’s struggles. So where UPS has stabilized its margins and watched its profit grow last quarter, FedEx’s margins have shrunk – and the firm saw a 40% drop in last quarter’s profit.
Zooming out: Failing to achieve lift-off.
FedEx isn’t the only struggling transport company out there. Earlier this week, aircraft-maker Boeing saw its share price fall after announcing a halt to the production of its 737 Max, the aircraft recently involved in two fatal crashes. Its suppliers have been left reeling from the decision, while some economists expect it to knock as much as 0.5% off the US economy’s growth next quarter (tweet this). | 