The courier business has managed to beat the estimation of the analysts however it remains quite concerned as it might lose one of its most important customers.
On Wednesday, FedEx Corporation reported its third quarter earnings which easily topped analyst’s estimates..The company managed to beat analyst’s estimates in terms of both revenue as well as earnings per share. It reported earnings of $2.51 per share, however in comparison to the analyst’s calculations which were at $2.37, the company performed fairly well.
On the other hand, three month period revenue that the Street’s analysts expected the courier company to report were $12.38 billion while it reported the revenue to be at $12.7 billion – again outperforming the expectations of the analysts. Net earnings for the third quarter fiscal year 2016 were reported to be $692 million, compared to the analyst’s estimations, a difference of $37.06 million can be seen, as they calculated the net earnings to be at $654.94 million.
The executives at FedEx Corp stated that the retailers in the industry should start to pay more for the shipments to offset the cost of current expansion of the company’s network that it is doing so specifically to meet the growing demands of e-commerce.
During the current year, the Wall Street Journal reports, that the courier organization increased its capital spending by as much as $4.8 billion. This increase in the capital spending is considered to be the largest increase that was incurred in the company’s ground division that also handles the e-commerce business – as per the report by the company, this increase is likely to continue for another two years.
The Financial executive of FedEx, Alan Graf stated that the company can’t just increase its network and spend that kind of capital and not expect to get a return and he believes that the price of shipping an e-commerce package should reflect the effort that took to get the package delivered.
The delivery giant also reported that the net income during the third quarter fell by 19% to 507 million. Before the company had reported the earnings, the stock of the company is the past 12 months had fallen by 19% mainly due to higher spending, uncalled for legal costs along with a rough holiday season, as it received increased competition from one of its competitors Amazon.com.
The chief executive Mr. Fred Smith stated that it is preposterous that a number of people believe that amazon will be able to build up a network even close to that of FedEx and/or UPS Inc. He added that just because the retailer has managed to build a network of warehouses does not mean it will be able to come to a position where these courier giants are.
The Memphis, Tenn. - based courier organization might believe that Amazon will not be able to build a network as strong as that of these courier companies but it does seem to be quite upset with the fact that if it works out for the e-commerce giant, FedEx might be losing one of its most important customers. At this point, Amazon has declined to comment.
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