We preview FedEx's FYQ3 earnings, using our text analytics platform to revisit Europe macro and supply chain challenges that were uncovered as part of our earlier FedEx assessment on December 2018. Our prognosis for Tuesday's earnings? Continued Europe issues and Amazon risk.
On December 20, we dubbed FedEx “Patient Zero” as our text analytics platform revealed it was among the first companies to call out weakening European macro and increasing supply chain pressures. On Tuesday, March 19th after the close the patient is due for a checkup when it reports FY3Q earnings.
What’s the prognosis? Expect confirmation of Europe macro struggles, while Amazon is the topic to watch.
Europe has emerged as the “new China” amid global growth concerns. The following commentary from the logistics ecosystem suggest the headwinds facing FedEx in Q2 were not just a blip, and unlikely to show improvement this quarter:
XPO Logistics (2/15/19):
Amazon’s relationship with the logistics industry is a complicated one. Amazon’s sheer volume makes them a valuable customer, while their interest in bringing more of the supply chain in-house is no secret. Are we starting to see the shift from “valuable customer” to “existential threat”?
Last quarter, FedEx dismissed any notion of Amazon becoming a significant competitor. However, since then, Amazon attributed some of its margin headwinds to increasing the mix of its own logistics network, and XPO reported a significant shortfall due to Amazon insourcing:
XPO Logistics (2/15/19):
This will come as no surprise, but FedEx’s Q2 was a significant downtick when analyzed through the Amenity Analytics NLP platform. Overall, the Amenity Score of the earnings call was -2, down 52 points from Q1. It was driven by more cautious forward-looking commentary, macro headwinds, and competitive pricing:
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This communication does not represent investment advice. Transcript text provided by S&P Global Market Intelligence.
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