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FedEx’s Earnings Miss

publication date: Dec 18, 2019
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Image Source: FedEx Corporation – 2019 Annual Stockholders Meeting September 2019 IR Presentation

In the days leading up to FedEx Corp latest earnings report where the firm missed by a mile, news broke that Amazon is now blocking third-party sellers that use its marketplace platform from using the FedEx Ground delivery service (which handles North American volumes) to ship to Prime customers. This comes on the heels of FedEx and Amazon ending two significant shipping contracts earlier this year, including the arrangement where FedEx Ground would handle some of Amazon’s packages, a deal that expired at the end of August. Please note that FedEx Ground is a small-package delivery service that caters to America and Canada, and that other FedEx options for certain packages bought through or sold by Amazon are still available. We are still staying away from FedEx as its ability to generate free cash flows remains pressured by its need to invest heavily in the business to keep up with the likes of Amazon and others. FedEx’s dividend payout could be at risk should exogenous shocks (i.e. a breakdown in the partial US-China trade war truce) continue weakening its financial performance.

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