10-QPeriod: Q1 FY2021

FEDEX CORP Quarterly Report for Q1 Ended Aug 31, 2020

Filed September 15, 2020For Securities:FDX

Summary

FedEx Corporation reported a strong first quarter for fiscal year 2021, driven by a significant surge in residential delivery demand, largely attributed to the ongoing COVID-19 pandemic. Consolidated revenue increased by 13% year-over-year, reaching $19.3 billion, while operating income more than doubled to $1.59 billion, reflecting improved operating margins across most segments. The company saw substantial growth in FedEx Ground, with revenue up 36% and operating income up 30%, as increased e-commerce activity boosted residential package volumes. FedEx Express also showed resilience, with revenue up 8% and a substantial increase in operating income due to international export and U.S. domestic package volume growth, as well as pricing initiatives in response to global air freight capacity constraints. Despite increased operating expenses related to COVID-19 safety measures, higher purchased transportation costs, and variable incentive compensation, FedEx managed to significantly improve profitability. The company's outlook for the remainder of fiscal year 2021 anticipates continued demand, particularly at FedEx Ground and FedEx Express, supported by yield management and productivity improvements. FedEx is also advancing its TNT Express integration, expecting completion of key phases in 2021 and 2022, aiming to enhance European operations and profitability. The company maintained a solid liquidity position, with cash and cash equivalents increasing to $7.0 billion.

Financial Highlights

42 data points
Beta

Revenue

$19.32B

Net Income

$1.25B

6.4% Net Margin

EPS (Diluted)

$4.72

Total Assets

$77.65B

Cash & Equivalents

$6.95B

Free Cash Flow

$2.65B

Financial Statements
Beta
Revenue$19.32B
Operating Expenses$17.73B
Operating Income$1.59B
Net Income$1.25B
EPS (Basic)$4.75
EPS (Diluted)$4.72
Shares Outstanding (Basic)262.00M
Shares Outstanding (Diluted)263.00M

Key Highlights

  • 1Consolidated revenue grew 13% to $19.3 billion in the first quarter of fiscal year 2021.
  • 2Consolidated operating income surged 63% to $1.59 billion, with operating margin expanding to 8.2%.
  • 3FedEx Ground experienced robust growth, with revenue up 36% and operating income up 30%, driven by a surge in residential delivery demand due to COVID-19.
  • 4FedEx Express saw revenue increase by 8% and operating income grow by 149%, benefiting from increased international export and U.S. domestic package volumes.
  • 5The company incurred approximately $100 million in additional operating expenses related to COVID-19 safety measures.
  • 6Cash and cash equivalents increased to $7.0 billion as of August 31, 2020, up from $4.9 billion at May 31, 2020.
  • 7Capital expenditures were largely flat year-over-year, with increased investment in aircraft and related equipment at FedEx Express offset by decreased spending in vehicles and trailers.

Frequently Asked Questions

The COVID-19 pandemic significantly boosted residential delivery volumes, particularly for FedEx Ground, as e-commerce demand surged. This led to unprecedented demand, rivaling peak holiday season traffic, and contributed to strong revenue and operating income growth for the company. However, FedEx also incurred approximately $100 million in additional operating expenses related to personal protective equipment, medical supplies, and enhanced safety measures for its employees and customers.

FedEx Express's operating income increased by 149% primarily due to growth in international export and U.S. domestic package volumes, which were supported by pricing initiatives responding to global air freight capacity constraints. Increased network operating efficiency and one additional operating day in the quarter also contributed. The segment also benefited from a $65 million reduction in aviation excise taxes under the CARES Act.

FedEx reported a healthy increase in cash and cash equivalents to $7.0 billion. Operating cash flow significantly improved, driven by higher net income and certain tax relief provisions. Capital expenditures were maintained at similar levels to the prior year, with a focus on aircraft modernization at FedEx Express and expanded hub investments, while also managing spending on vehicles and trailers. The company anticipates its operating cash flow will be sufficient to fund its projected capital expenditures for the remainder of the fiscal year.

FedEx anticipates continued strong demand for its services, particularly at FedEx Ground and FedEx Express, driven by ongoing e-commerce trends. Yield management and productivity improvements are expected to support revenue and operating income growth. The company is also progressing with its TNT Express integration, with key phases expected to complete in 2021 and 2022, aiming to improve performance in European markets. However, the company acknowledges the inherent uncertainty due to the ongoing COVID-19 pandemic and potential impacts on the global economy.