FedEx Corp. (NYSE: FDX) had a disappointing second quarter 2020 with lower revenue and earnings that missed estimates. The company also slashed its full year earnings guidance. FedEx has been seeing weakness in its core business while struggling with global economic volatility and trade war-related uncertainties.
Despite these setbacks, the company has expressed confidence in its strategies, outlined during its quarterly conference call, which are expected to see fruition by the fourth quarter of 2020 and into fiscal year 2021.
Firstly, FedEx is working to include year-round, seven-day delivery in its North American package services to meet the needs of the fast-growing ecommerce market. The company is also taking steps to ensure the profitable delivery of a larger number of packages. These actions are seeing good traction with a significant year-over-year increase in package volumes. The company forecasts FedEx Ground margins to be in the teens by the fourth quarter.
Secondly, FedEx is making efforts to include the completion of European ground interoperability in its FedEx Express international operations in the fourth quarter of 2020. The company will also take down its intercontinental capacity due to trade disputes. FedEx expects to improve profitability in the FedEx Express segment going into fiscal year 2021.
In addition to this, FedEx is reshaping its global portfolio and seeing significant wins in its ecommerce business. The company is seeing solid demand across all its segments thanks to its new seven-day service.
The company plans to continue its expansion efforts in the coming year and anticipates that 90% of the US population will be within five miles of a FedEx drop-off and pickup location by the next peak season.
FedEx has a strong pipeline in its Freight Direct business and this service is expected to reach 90% of the US population by July. The company is seeing good momentum in the small business segment and continues to manage its portfolio of large customers in a strategic manner. These strategies are expected to help drive growth during the coming year for FedEx.
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