As expected FedEx's FYQ3 earnings disappointed with the root cause being international and supply chain challenges. We used our text analytics platform to explore the issues as well as uncovered a new development around China that bears watching.
FedEx reported lower-than-expected revenue and earnings for FY3Q, and lowered its outlook for FY4Q. Consistent with our expectations, there were both cyclical and secular issues at play which we explore with our text analytics platform.
We have been clear that this is not a threat to our business because Amazon represents less than 1.3% of our total revenue
There may not be a direct impact on FedEx’s revenue from Amazon taking more delivery in-house, but that’s not the whole story. As the grocery industry can attest to, the cost of keeping up with Amazon can be more painful than lost direct revenue.
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”?
The impact of international macro weakness was not surprising given what FedEx had seen in December and what has transpired since. However, FedEx did call out a recent uptick in China, which bears watching:
As shown below, the FedEx earnings call sentiment improved somewhat from the miss in December, with an Amenity Score of 19, up from -3. This remains well below levels seen in the June/September quarters. In terms of Key Drivers identified by the Amenity NLP platform, increasing macro pressures (Headwinds), and increasing focus on cost reductions (Cost-Price) stood out:
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This communication does not represent investment advice. Transcript text provided by S&P Global Market Intelligence.
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