Amazon and Google have been throwing around ideas of new same-day delivery

FedEx is one of the largest courier services in the US. It benefited hugely by the increasing trend of e-commerce which greatly increased the demand for courier packages. With the expansion it benefits not only with larger sales revenue but also Economies of Scale which result in a greater profit percentage. However this might end soon, much to the apprehension of FedEx. 

 

Tech giants Amazon (AMZN) and Google(GOOGL) have been throwing around ideas of new same-day delivery technologies including driverless cars and automated drone shipments. This deeply threatens the postal industry FedEx operates in. This is likely to reshape the logistics industry sometime in the foreseeable future.


At the end of its 4th fiscal quarter of 2014, shares of FedEx shot 6% higher in response to the higher earnings. However this was not distributed evenly in every segment. 
 
FedEx has three major segments; Sales, Ground and Freight. While Sales grew only marginally from $6.98 billion to $7.00 billion, FedEx Ground showed a better performance. Its revenue increased 8% and the Ground segment’s daily delivery volume was up 8%, boosted largely due to growth in e-commerce. Freight, showed the largest relative revenue increase, a 12% increase. 
 
Recently the expectations from FedEx have increased even more.  Estimize is forecasting that FedEx will report a 2 year best improvement, with earnings per share rising by 28%. Also revenue will match a 6 quarter best yoy growth rate of 4%.
 
A lot of it depends on Alibaba too.  If the Chinese e-commerce giant can quickly gain a foothold in the United States and outside mainland China, there will be a spike in the demand for delivery logistics which FedEx and other courier services may capitalize on.  
 
It is safe to assume FedEx will be profitable. However, questions begin to arise when one considers the potential for Amazon, Google, and other tech companies to go after the logistics business 5 to 10 years from now. However, for now, Amazon and Google will rely on couriers for high scale logistics support, at least until they release autopilot enabled cargo planes, driverless electrics trucks, teleportation or the likes. 

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