Logistics stock to watch: FedEx Corporation (NYSE: FDX)

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FedEx Corporation (NYSE: FDX) stock fell over 3.1% in the pre-market session of March 18th, 2020 (Source: Google finance) as the company missed the earnings estimate for the third quarter of FY 20. FDX in the third quarter of FY 20 has reported the adjusted earnings per share of $1.41, beating the analysts’ estimates for the adjusted earnings per share of $1.43, according to figures compiled by Thomson Reuters. The company had reported the adjusted revenue growth of 2.9 percent to $17.5 billion in the third quarter of FY 20.

Meanwhile, in February, the company has managed the influx of shipment requests to China amid limited capacity by implementing a temporary peak surcharge for US outbound freight shipments and adjusting the transit commitments to China to maximize the capacity utilization. The company has also dynamically adjusted spot prices to and from China. Total air cargo capacity reduction to and from Mainland China from early February to early March is estimated at 40% year-over-year. The recently implemented travel ban between Europe and the US is anticipated to impact cargo capacity significantly since approximately 60% of the air freight capacity between Europe and the US are on passenger flights. The company is now employing the same strategies in other parts of the world that have helped the company manage demand and capacity constraints in China, including transit time extensions, dynamic spot price management and will also leverage peak surcharges for specific lanes and periods of time as they are required. While the Freight segment of the European business has been under significant pressure, the company continues to focus on growing the parcel mix in the network. In Q3, the international European parcel volume rose year-over-year, with deferred growing at a faster rate than priority.

Furthermore, the company continues to make significant progress on TNT integration around the world, and is on track to deliver important milestones as the company end the fiscal year. In Q4, the company will complete the interoperability of the intra-European ground network. This will enable the company to lower the cost to serve as the related FedEx operations continue to be optimized. The company also is fully on track for completion of the air network integration in fall 2021, which will bring to a close the physical network integration of TNT into FedEx.

FDX expects to finish FY ’20 with capital spending of approximately $5.9 billion.

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