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FedEx Corp FDX

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Pricing Still Robust, but FedEx’s Fiscal First-Quarter Ground Margins Hit Hard by Labor Constraints

Matthew Young, CFA Equity Analyst

Analyst Note

| Matthew Young, CFA |

While labor constraints weighed heavily on margins, strong pricing conditions persisted in FedEx’s fiscal first-quarter 2022 (ended in August), with revenue up 14% year over year. Consolidated top-line growth came in slightly below our expected run rate due to noise from the onset of very tough B2C volume comparisons and labor-related limitations, especially at ground. Total ground package volume fell 2% year over year, versus 23% growth for all of fiscal 2021 (ended in May). Despite tough comps, however, we suspect residential package-delivery demand remains healthy given rising levels of e-commerce, and B2B activity has posted solid recovery (ground’s commercial volumes rose 12%). At express, solid export package demand continued to bolster international-priority volumes (up 11%). For the LTL division (freight), heavy retailer restocking and strong yield gains once again drove impressive top-line growth (23%).

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Company Profile

Business Description

FedEx pioneered overnight delivery in 1973 and remains the world's largest express package provider. In its fiscal 2020 (ended May 2020), FedEx derived 51% of revenue from its express division, 33% from ground, and 10% from freight, its asset-based less-than-truckload shipping segment. The remainder comes from other services, including FedEx Office, which provides document production/shipping, and FedEx Logistics, which provides global forwarding. FedEx acquired Dutch parcel delivery firm TNT Express in 2016. TNT was previously the fourth- largest global parcel delivery provider.

942 South Shady Grove Road
Memphis, TN, 38120
T +1 901 818-7500
Sector Industrials
Industry Integrated Freight & Logistics
Most Recent Earnings Aug 31, 2021
Fiscal Year End May 31, 2021
Stock Type Cyclical
Employees 564,000