Categories Analysis, Industrials

FedEx (FDX) remains confident that ecommerce has a long growth runway

For FY2021, FedEx is projecting an adjusted EPS of $17.60-18.20

Shares of FedEx Corp. (NYSE: FDX) were up over 6% on Friday. The stock has climbed 151% in the past 12 months. FedEx reported strong results for the third quarter of 2021 which beat market estimates. The quarterly performance was driven by the rapid growth in ecommerce which was fuelled by the COVID-19 pandemic.

Quarterly performance

Total revenue grew 23% year-over-year to $21.5 billion. Earnings, both on a GAAP and adjusted basis, almost tripled to $3.30 per share and $3.47 per share respectively. Both the top and bottom line numbers were better than expected.

Ecommerce growth

On its quarterly conference call, FedEx said that ecommerce, as a percentage of US retail sales, was around 21% in the fourth quarter of calendar year 2020. This was significantly above the pre-pandemic level. Several retailers have reported double-digit and triple-digit growth in ecommerce sales since the start of the pandemic in 2020.

FedEx witnessed strong growth during its peak season, with deliveries of around 500 million packages and an increase of 19% in average daily volume on a year-over-year basis. The company estimates that the US domestic parcel market will grow to 101 million packages a day by calendar year 2022, with ecommerce contributing 86% of total US market growth.

FedEx has seen strong growth in parcel volume during FY2021 helped by a portfolio of rapidly-growing ecommerce solutions. Its FedEx Ground residential delivery service saw a 70% growth in volume during the third quarter.

Although FedEx believes it is likely that the momentum in ecommerce might decelerate as things normalize, it is still optimistic about the evolution of this market and believes ecommerce, as a percentage of retail, has a long growth runway.


FedEx expects air cargo capacity to remain constrained through the end of calendar year 2021. The company also expects passenger capacity to recover between 55-75% of its pre-COVID level by the end of CY2021 but a full recovery is not expected till 2023 or 2024.

For FY2021, FedEx is projecting an adjusted EPS of $17.60-18.20. In the fourth quarter of 2021, the company expects revenue and operating margins to grow on a year-over-year basis at all its transportation segments. This outlook assumes a continued recovery in US industrial production and global trade, no additional pandemic-related business restrictions, and current fuel price expectations.

Click here to read the full transcript of FedEx Corp. Q3 2021 earnings conference call

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