On Thursday, FedEx reported better-than-expected fiscal second-quarter earnings (Q2 2022) with revenue rising 14% to $23.5 billion as labor shortages continue to impact the business.
Here are highlights from the earnings call:
- The carrier picked up 100 million packages during Cyber Week which includes the top holiday shopping weekend of Black Friday – Cyber Monday.
- FedEx Ground alone added 14.4 million square feet (equivalent to about 300 football fields) to its network to be ready for peak season this year.
- Labor pressures are easing as FedEx reported it received 111,000 applications for the year, the highest level in company history. Still, the company said the difficult labor market cost it $230 million (YoY) in additional wages and premiums for third-party contract services. An additional $240 million (YoY) was spent repositioning equipment, higher usage of third-party transportation services, and recruiting incentives.
- In January, the Ground Economy peak surcharge will be replaced by the new Ground Economy delivery surcharge ($1). FedEx Ground Economy is the new name for FedEx SmartPost. This adds to several new surcharges the company keeps rolling out as part of its pricing strategy.
- FedEx forecasts that the US domestic parcel market (all carriers) will reach 134 million pieces a day by 2026, 70% growth from 2020.
- The company expects supply chain and air cargo capacity constraints to continue for some time.
- Not well known, but FedEx Freight is the largest LTL (less-than-truckload) company in North America. That division also supports FedEx Ground and traveled four million miles on behalf of FedEx Ground this year.
- FedEx expects that 50% of FedEx Express global PUD (pick-up/delivery) vehicles will be electric by 2025, 100% of purchases by 2030. Today, the company announced its first electric PUDs from BrightDrop.
- FedEx in Europe is on track to finish the integration of TNT (acquired in 2016) by April 2022 with Paris Charles de Gaulle Airport (CDG) serving as the main hub for all European and intercontinental flights. The company continues to add new flights to CDG such as the recently added seven inter-European routes and direct flight between Europe and Japan. Liege, (previously the primary hub of TNT) will continue to connect large European markets.
- The European air expansion will also provide more overnight service (“the very best coverage”) from Western Europe to the US.
- FedEx also approved a new $5 billion stock buyback program.
Notable FedEx Quote
FedEx Founder, Chairman and Chief Executive Officer Frederick W. Smith discussed the US trading relationship with China during this earnings call when prompted by an analyst. Here are excerpts of his comments:
“We have expressed to both Republican and Democratic administrations that we feel that it was a major mistake for the United States to walk away from the Trans-Pacific Partnership. What that agreement did was to allow us to deepen our trade ties with our other trading partners. And of course, given the leadership of Japan, the other participants did go forward with it. So, the best way to normalize the relationships with China is to sign TPP and get a more normalized trading relationship, which China would like to then join.”
“The best way to keep a harmonious relationship with China is not to disconnect, to trade where we can. And that’s what we support. And I’m hopeful that at the end of the day that cooler heads will prevail and we’ll join the TPP and we will try to have that constructive relationship with China.”
“We are strong free traders and we think we should stay engaged in China and we hope the administration does that. And I quite frankly, am optimistic because I think at the end of the day, that view will eventually prevail. Particularly in a period of labor shortage, it’s impossible for the United States to manufacture all the goods that consumers in the United States want. So, I hope that was helpful.”Frederick W. Smith, Founder, Chairman and CEO, FedEx
This earnings information is a synopsis of curated highlights. Please see the FedEx Quarterly Results page for the full details on the company’s quarterly results and guidance.
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