Will Late Deliveries Doom This Courier Service This Holiday Season?

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FedEx (FDX) – Industrials – Air Freight & Logistics | Reports December 16, before market open

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A not so happy holiday season will lead to late deliveries, again

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FedEx, a global courier delivery service, is set to report fiscal 2Q2016 earnings Wednesday morning. Historically, the holiday season has been everything but positive for the Memphis, TN based company. High volumes, not enough workers, and UPS dominance in the market usually cooks up below-average earnings reports for FedEx. This holiday season, Wall Street analysts are expecting to see year-over-year increases in both revenue and EPS, however, FedEx has missed earnings forecasts in three of the last four quarters. The Estimize consensus calls for EPS of $2.55 and revenue of $12.45 billion. Wall Street analysts are predicting EPS to come in two cents lower and revenue of $12.4 billion.

The holiday season tends to be one of the busiest shopping times of the year. With a rise in e-commerce sales, both FedEx and UPS have had to hire additional workers to alleviate delivery pressure, but to no avail. FedEx nonpeak on-time deliveries fell below its average of 95% while UPS’ dipped to 91%. Last year, several thousands of customers complained to FedEx because of shipments arriving after Christmas day. FedEx expects to deliver around 317 million packages between Black Friday and Christmas Eve. However, FedEx has taken action to set itself up for growth and profit to offset any losses that could be incurred this season.

Arguably one of their most important initiatives, the shipping company has declared that it will not accept more packages than it can take. It’s simple, smart, and ultimately could save lost revenues down the line. Another step they are taking is to invest $1.6 billion in 2016 in their largest growing segment: FedEx ground. With more trucks and drivers on the road, FedEx could potentially avoid late deliveries for the next holiday time frame.