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FedEx Is Struggling To Shake off the Pandemic-Domino Effect

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On Tuesday, parcel delivery company FedEx Corporation (NYSE: FDX) reported a decline in quarterly profit along with cutting its earnings outlook due to higher costs and labor shortages. Upon the news, its shares declined more than 4% in after-hours trading.

Figures

For the quarter that ended in August, revenue rose 14% to $22 billion which was in line with Refinitiv survey of Wall Street analysts. But net income slid to $1.1 billion, or $4.09 a share, below FactSet expectations of $4.88. During the same quarter last year, it earned $1.25 billion, or $4.72 a share, translating to an 11% drop in profit. Excluding restructuring and integration expenses, per-share earnings become $4.37. The tight labor market increased spending to by $450 million as FedEx needed to pay more overtime and raise spending to attract workers while it also needed to spend more on transportation. Salaries and employee benefit expenses alone rose 13%, including 27% in its Ground division. Moreover, shipping demand unexpectedly slowed due to supply-chain disruptions as the current labor environment is driving operational inefficiencies that are dragging down financial results.

Outlook

Tennessee-based delivery giant expects FedEx further downgraded its per-share earnings forecast that it issued in July. Per share earnings before certain accounting adjustments for the fiscal year that started in June are expected to be in between $18.25 and $19.50

Failed attempt to offset higher costs

Like United Parcel Service, Inc (NYSE: UPS), FedEx raised prices and imposed surcharges to offset higher costs associated with the surge in demand as the volume of commercial ground and express packages rose. However, supply chain disruptions slowed domestic parcel demand in the US compared to last year.

On Monday, FedEx announced it will raise its rates 5.9% on average at the beginning of 2022. This is the highest annual increase both FedEx and United Parcel Services Inc. have implemented over the last eight years. But both shipping companies instituted new fees and raised rates on customers as the environment has provided them with increased pricing power.

FedEx’s struggles aren’t going away

According to its Chief Operating Officer Raj Subramaniam, the consequences of a constrained labor marketscontinues to weigh heavily on operations and consequently, financial performance. In an effort to catch up, the company is diverting 25% of the volume bound for its troubled Portland hub to other locations, adding trucking routes and hiring assistance from third-party transportation companies. About 600,000 of its packages a day are being rerouted in attempt to address these network bottlenecks.

The problem is that disruptions are hampering the entire supply chain, from factories starving for parts to congested ports and railroads. Online sales are also taking as consumers shop in store or pick up their orders themselves.

UPS is ahead

On one hand, FedEx picked up some business from UPS as the company was cutting ties with some customers to focus on more profitable business. On the other, it lost customers such as Clean Eatz Kitchen Inc. due to delays that costed the company thousands of dollars worth of shipments of ready-to-eat frozen meals that ended up spoiled. Recently, the company shifted all its business to UPS, saying that on-time delivery rates are in the high 90s after it made the switch.

Even more challenges ahead

FedEx is facing these challenges only weeks before the busiest time of the year for the industry, the Christmas time. Similarly to last year, the company aims to hire 90,000 workers to help with the holiday rush. But merchants and retailers are facing another hard year shaped by shipping capacity. According to ShipMatrix estimates, US shipping demand will be greater than the available capacity by 4.7 million parcels a day, both throughout November and December. Although it is significantly less than last year’s 7.3 million shortfall, millions of packages are still at risk of not being on time for Christmas unless consumers shop early. FedEx is clearly struggling with higher labor costs, as well as the fact that pandemic-induced e-commerce boom has slowed down.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

BenzingaEditorial

Apple Is Shaking Facebook’s Revenue

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On Monday, shares of the social media giant rose 2% in extended trading as investors focused on earnings beat and looked past the massive and ongoing whistleblower scandal. However, despite better-than-expected third-quarter earnings, Facebook Inc’s (NASDAQ: FB) revenue missed estimates due to Apple Inc’s (NASDAQ: AAPLE) privacy changes.

Third quarter figures

Revenue in the third quarter rose 35% from a year earlier to $29.01 billion.

Net income rose 17% to $9.2 billion, resulting in earnings per share of $3.22.

Daily active users (DAUs) amounted to 1.93 billion, exactly as expected by StreetAccount analysts survey, whereas monthly active users (MAUs) amounted to 2.91 billion, slightly below the Street Account estimate of 2.93 billion. Average revenue per user (ARPU) amounted to $10.00.

Going against TikTok

The world’s largest social network is facing an existential crisis represented by an aging user base. As part of an effort to make its platforms more appealing to users between the ages of 18 and 29, Facebook will make significant changes in the next year to focus more on its full-screen video Reels feature that competes directly with TikTok. CEO Mark Zuckerberg warned that this shift to serve these young adults will take years to be fully executed. Zuckerberg has high hopes for this feature, expecting it to ultimately it will be as significant to Facebook as the adoption of the News Feed and Stories features.

The metaverse is in the making

Facebook of tomorrow should look very different than the advertising-based business of today.

The first glimpse of this transformation will be seen by the Facebook Reality Labs unit that focuses on hardware, augmented reality and virtual reality products.

Facebook expects its investment in the hardware and VR segment to trim operating profit in 2021 by approximately $10 billion. As a reminder, it announced it is forming team who will work on the digital universe in which multiple people can interact within a 3D environment back in July. Two months later, it announced Andrew “Boz” Bosworth, the hardware boss, will be taking over as Chief Technology Officer next year.

Fourth quarter guidance

The social media giant announced that as of the undergoing quarter, its Facebook Reality Labs will be included into its own reporting segment. The other revenue segment will come from its apps, including Facebook, Instagram, Messenger and WhatsApp, as well as other services.

Fourth quarter guidance

Facebook expects revenue for the undergoing quarter to be in the range between $31.5 billion to $34 billion which is below analyst projections of $34.8 billion. Precautions have been taken due significant uncertainty owed to continued headwinds from Apple’s iOS 14 updated as well COVID-related factors and the overall macroeconomic environment. Just like Snap (NYSE: SNAP) whose shares tanked 27% after its disappointing earnings report last week, even Facebook’s business was disrupted by privacy changes.

What about the Facebook Files?

Frances Hagen released internal documents that showed that the number of teenage users of the Facebook app in the U.S. has declined by 13% since 2019, with a projected drop of 45% over the next two years and the number of users aged between 20 and 30 declining by 4% during that time frame, Haugen initially shared documents with The Wall Street Journal but she appeared before a Senate panel earlier this month to testify, basically saying that the company puts profit above the safety and health of its users. The reports show that Facebook is aware of many of the harms its platforms cause, particularly to teenage girls, but is not taking action to address or rectify them. She also claimed her intention was to ‘fix’ the company, not harm it.

Zuckerberg began the earnings call rebutting the claims and referred to the scandal as “a coordinated effort to paint a false picture of the company by selectively using internal documentation. Zuckerberg also expressed his opinion that social media is not the main driver of these issues which is why it probably can’t fix them by itself either.

Takeaway

It seems that investors shrugged off the internal documents that showed, among other things, the detrimental effect of Instagram on teens’ mental health. Earnings and the fact that the social media giant is adding $50 billion to its stock buyback program pleased investors. Despite regulators and the ongoing document dump, Facebook is preparing for a massive transformation of its business model while its ad business keeps growing at a healthy pace.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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BenzingaEditorial

P&G Is Making the Best Out of a Tough Situation

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Last Tuesday, The Procter & Gamble Company (NYSE: PG) topped Wall Street’s estimates both for its fiscal first-quarter earnings and revenue. Like its peers, Colgate-Palmolive Company (NYSE: CL), General Mills Inc (NYSE: GIS) and Kleenex maker Kimberly-Clark Corporation (NYSE: KMB), it resorted to price increases this year to help make up the difference. Price hikes did help offset higher freight costs but it wasn’t enough to keep up with climbing commodity costs. The company raised its forecast for inflation, predicting that higher commodity and freight costs could trim fiscal 2022 earnings by $2.3 billion, which is worse from its prior outlook of $1.9 billion. Upon the report, shares fell more than 2% in pre-market trading, putting the stock at risk of losing this year’s gains.

Quarter figures

For the fiscal first quarter that ended on September 30th, net sales rose 5% to $20.34 billion, topping expectations of $19.91 billion. Although mounting supply chain challenges took some shine off stronger quarterly sales., organic revenue, which strips out the impact of acquisitions, divestitures and foreign currency, increased by 4% YoY as it was helped by higher pricing and demand for laundry detergent, razors and healthcare products. But this figure looks less optimistic when compared to last year’s 6% spike.

Net income dropped 4% YoY due to higher expenses. It amounted to$4.11 billion, or $1.61 per share, whereas analysts surveyed by Refinitiv were expecting a bigger decline with earnings per share of $1.59.

Segments

P&G has benefited from resurging demand in the personal hygiene aisle as consumers returned to offices and social gatherings. But demand for pantry staples such as toilet paper has continued being just as resilient.

Health care which includes brands like Oral-B was the company’s top-performing segment this quarter, with organic sales growth of 7%.

Fabric and home care, P&G’s largest segment, saw an organic sales growth of 5%.

The grooming business that includes its legacy razors also enjoyed an increase in organic sales amounting to 4%.

The beauty and baby, feminine and family care units both experienced a 2% rise of organic revenue. The beauty segment owes it to hair-care and skin and personal-care divisions, that exhibited both higher volume and innovation in hair treatments. The baby unit benefited from more consumers buying premium Pampers diapers and pants, managing to offset the fall of organic sales of Charmin toilet paper and Bounty paper towels despite increased promotion spending.

All in all, the good news is that P&G grew sales across all of its business segments.

More price hikes

As increased pricing reaches store shelves, the company is closely monitoring consumption trends and while it is still early, it has not observed any notable changes in consumer behavior. The company will ramp up its productivity programs throughout the fiscal year and still plans to introduce innovation to improve value to follow up the higher pricing.

P&G CFO Andre Schulten announced price hikes on selected products from the beauty, oral care and grooming range, without intentionally prioritizing premium products.

Guidance

Despite the challenges, P&G sticked to its prior full year forecasts, both in terms of earnings and revenue. It is calling for fiscal year sales to grow 2% to 4% from the prior year and core earnings per share to increase in the range from 3% to 6%. After-tax commodity costs are expected to add up to $2.1 billion with freight expenses of $200 million. When it reported its previous quarter three months ago, management forecasted that the combined effect of commodity and freight costs would hit its fiscal 2022 earnings by $1.9 billion.

A steady outlook

P&G remains as one of the most efficient businesses on the market. Operating cash flow was almost $5 billion with nearly all of those earnings converted into free cash. Free cash flow conversion is expected to be as as high as 90% for the full fiscal year.

Making the best out of a tough situation

Management does not expect that commodity cost pressures will ease, but higher selling prices are supposed to soften the blow. The company has no other choice but to continue paying more for raw materials as well as fuel, while still experiencing truck driver shortages. By the looks of it, this won’t be the only time that higher costs weighed on the company’s profits as the company believes inflation is still increasing and taking a hit to consumer’s wallets. According to the Financial Times, it is dangerously approaching near its highest level in 13 years.

Supply chain costs would be higher than it had previously anticipated but P&G is doing the best it can by having backup suppliers, changing shipping routes, reformulating products and even limiting how much a retailer can buy.

Despite soaring commodity costs and supply-chain disruptions, the consumer products giant managed to continue growing its business in the latest reported quarter. Management did warn those issues will take a bigger bite out of fiscal 2022 earnings, but the company is still expecting another strong year for the business. All in all, as CEO David Taylor summarized it, the company delivered solid results in a challenging cost and operating environment.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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BenzingaEditorial

A Big Earnings Week Ahead

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This week, many Wall Street darlings are set to report their latest quarterly results. Given the trend of stronger-than-expected results that have been posted by now, this week’s set of reports have a heightened bar to clear. Fortunately, it’s something that Big Tech companies, including Facebook (NASDAQ: FB), Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), showed they are well capable of. 2021 isn’t as bright as 2020 which was shaped by global pandemic that held the world’s population at home, fueling unprecedented demand for their software, and growth seems to be slowing down. Snap Inc’s (NYSE: SNAP) recent revenue miss and weaker-than-expected fourth-quarter guidance was a reminder of how earnings season can bring some major surprises, in both directions.

Facebook

After Snap’s  miss due to global supply and labor shortages, as well as recent changes to advertising tracking and measurement on iOS, investors will be looking to see if Facebook was caught up in the same headwinds on Monday after market close.But it’s always possible that the social network comes out unharmed from the challenges Snap struggled with.

There are certainly some reasons to think Facebook could at least avoid some of the iOS headwinds as unlike the teen mobile platform, the social network pioneer has a meaningful presence on desktop as well.

Microsoft

Wall Street expects Microsoft to report earnings per share of $2.07 along with revenue of $43.97 billion as demand is fueled by sustained work and learn from home trends. Although robust quarter results are likely, Microsoft is also expected to provide better-than-expected guidance to show it can maintain its impressive growth momentum.

Amazon

E-commerce and cloud giant could be similarly impacted by global supply and labor shortages but the question is how accurately did management account for these setbacks back when it provided guidance in its previously reported quarter. After all, it was already clear these issues will persevere until the end of the year.

On Thursday after the close, investors will be equally interested in Amazon’s third-quarter results as well as its Q4guidance as the holiday quarter typically represents a large portion of the company’s revenue and an even bigger share of its profits.

Alphabet

Although Google’s earnings aren’t as exposed to Apple’s privacy changes that knocked down Snap, Alphabet has its own set of worries. Antitrust issues could start to cost Google.

Google has invested heavily in developing aggregated measurement approaches to prepare for Apple’s privacy changes, but its primary headache continues to be antitrust scrutiny both in the U.S. and abroad. As a result, the company has announced last Thursday it will halve its app fees to 15% to ease the mounting pressure from developers, regulators and lawmakers who criticized its digital store for not being accessible enough.

Apple

On Thursday, Apple is about to answer some burning questions for investors. The tech giant will reveal how well its new products, like the iPhone 13, are selling, although actual sales figures won’t matter that much to overall quarter revenue as they were only present during the final days of the quarter. We’ll get big updates on Apple’s growing services segment along with an official sales projection for the critical holiday quarter ahead where investors will be looking how is Apple managing supply chain challenges. Apple is also facing its own set of regulatory pressures. Back in September said it would allow app developers like Netflix Inc (NASDAQ: NFLX) and Spotify Technology S.A. (NYSE: SPOT) to provide customers a link to create a paid account and avoid Apple’s in-app-purchase commissions that go up to 30%.

As of last Friday, about 23% of S&P 500 companies had reported their third quarter results, with FactSet reporting that 84% topped Wall Street’s expectations for earnings per share.

This article is not a press release and is contributed by a verified independent journalist for IAMNewswire. It should not be construed as investment advice at any time please read the full disclosure. IAM Newswire does not hold any position in the mentioned companies. Press Releases – If you are looking for full Press release distribution contact: press@iamnewswire.com Contributors – IAM Newswire accepts pitches. If you’re interested in becoming an IAM journalist contact: contributors@iamnewswire.com

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