FDX Corp (FDX) 38 1/4 -5 7/16: So what happened to that ecommerce boom? Either the upcoming UPS IPO is a screaming buy or we all have some questions to ask about ecommerce and its impact on the package delivery business. The ecommerce boom is theoretically fuelling a package delivery boom, as we all get overnight, 2-day, and 3-day shipments of books, CDs, PCs, apparel, even 40 lb bags of dog food! Yet if that's the case, how has FedEx only managed to record a 3% year/year increase in daily package volume? Either UPS and the US Postal Service are recording the vast majority of the ecommerce shipping boom, or ecommerce shipping increases are being offset by decreases in other business lines, or the ecommerce boom is not all it was thought to be. We don't have the answers, but those are the questions that we must ask after this morning's ugly earnings report from FDX. Not only did the company miss estimates for the quarter in reporting a Q1 net of $0.52 versus a First Call mean of $0.54, but the company also warned that if "lower U.S. domestic growth" continues, earnings for Q2 and the fiscal year will miss analysts' estimates. The company's woes would be less perplexing were they due entirely to higher oil prices or pricing pressures in the shipping business, but the biggest problem for FDX is simply weak growth in the number of packages being shipped domestically. It is plausible that what the Internet giveth, the Internet taketh away. In other words, the Internet has given FDX many more package shipments, but perhaps it has simultaneously reduced the need for overnight shipping of many letters and documents that can now be delivered electronically. Once again, we're only guessing here. But some important questions will need to be answered ahead of the expected UPS IPO in November. Q3 earnings for UPS should be reported next month, and will probably contain some important answers. If UPS package volume is strong, FDX is just an underperformer. If it's weak, then the strength of the ecommerce boom -- or at least the strength of its impact on package delivery -- has to be questioned. - GJ
|
