Of late, cargo companies have been facing competition from Amazon (AMNZ) as the tech firm continues to expand its presence in the transport sector. Given the e-commerce giant’s track record of diversifying successfully, the threat it poses to cargo companies like FedEx and United Parcel Service (UPS) cannot be ignored.
Since their initial release, the estimates were trimmed to reflect the bearish sentiment among the analysts
With the new equations putting additional pressure on market share, FedEx needs to ease the strain on margins by continuing its cost-cutting initiatives. Efforts should also be made to expedite the integration of TNT Express, which has not been completed, though the acquisition was closed several months ago.
When results for the second quarter of 2019 were published, the positive sentiment over the impressive outcome was spoiled by the downward revision of the full-year earnings outlook by the management. Though adjusted earnings and revenues rose to $4.03 per share and $17.8 billion respectively, the stock dropped.
Related: Listen to FedEx quarterly earnings conference calls
In January, rival cargo mover United Parcel Service posted double-digit growth in fourth-quarter adjusted earnings to $1.94 per share. It reflected broad-based revenue growth that pushed up the top-line by 5% to about $17 billion.
The recent dip in the stock price makes FedEx a promising investment option – a status that is expected to remain unchanged in the remainder of the year and beyond. The decline of the shares over the past twelve months was pretty quick, losing about 33%. However, the stock recovered from the multi-year lows seen towards the end of last year and stabilized in the early weeks of 2019.