(Bloomberg) — FedEx Corp. rode higher Ground package volume and increased prices to post profit above analysts’ estimates, easing investor concerns over higher labor U.S. costs.
Adjusted earnings were $4.83 a share for the quarter ending Nov. 30, above analysts’ estimates. The latest figure was in line with what it reported a year earlier, when U.S. cities were locked down to slow the spread of Covid-19. Revenue rose 14% to $23.5 billion, driven by price gains. Analysts had predicted $22.4 billion, based on estimates compiled by Bloomberg.
FedEx’s shares jumped 7.7% to $257 at 4:09 p.m. in New York after the close of regular trading. The stock had declined 7.3% this year through Wednesday while the S&P 500 Industrials Index gained 17%.
The courier has struggled with a lack of workers at its sorting hubs, which has lowered capacity and forced the company to incur additional costs to re-route packages. Wages have risen as FedEx competes with other companies, including rivals United Parcel Service Inc. and Amazon.com Inc., to ramp up holiday hiring amid a tight labor pool.
FedEx aggressively raised prices this year as retailers attempted to secure delivery capacity during the busiest season of the year. The courier also has focused on increasing sales to smaller shippers that usually don’t command discounts from list prices, helping to offset some of FedEx’s higher costs.
FedEx rival UPS has fared better during the labor shortage thanks to a mostly unionized workforce that is paid higher than the industry average and has wage rates that are locked in until 2023.
The struggles at FedEx are reflected in its on-time delivery performance, meeting deadlines for 85.7% of packages from Nov. 14 through Dec. 4, according to ShipMatrix. UPS logged 96.4%, while the U.S. Postal Service figure was 95.1%.
FedEx’s adjusted operating margins were 7.1%, down from 7.4% a year earlier. The company had extra costs of $470 million from a year ago because of the labor shortage.
FedEx has said it expects that its higher costs will subside in the second half of its fiscal year, which runs through May. The Memphis, Tennessee-based company boosted its latest full-year profit outlook to $20.50 to $21.50 a share, excluding expenses from integrating its TNT Express unit and fluctuations in pension-fund values.
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