What FedEx’s Strong Earnings Report Says About the Economy

FedEx isn’t just a package delivery company. Economists also look to it as an indicator as to how the broader economy is doing.

That’s because shipping is related to just about every industry you can imagine. (Think about all the packages from Amazon that get shipped and delivered every day.) FedEx, which competes with UPS and is a blue chip stock, is one of the largest shipping and logistics companies in the world.

In fact, transportation-related purchases accounts for 8.4 percent of U.S. GDP, or $1.4 trillion, according to the U.S. Department of Transportation.

And with $60 billion in annual revenue, and nearly half a million employees, it makes sense that FedEx is a bellwether (a fancy word for trend indicator) of how things are looking for the U.S. economy.

FedEx delivers positive forecast

The good news is that Fedex reported stronger than expected earnings for the end of its fiscal year on Tuesday. It also presented a strong forecast for its earnings in the year ahead.

 Breaking things down a bit more:  

• FedEx beat analyst expectations for its fourth quarter 2017, which means it had a better than expected three months.
• For the quarter, revenue increased 7% to $7 billion, and for the full year — FedEx’s fiscal year ends May 31 — it reported revenue, or sales, that increased by 20% to more than $60 billion.
• Its guidance for 2018 is also strong, predicting a profit increase as high as 14% for the coming year, according to reports.
• FedEx said international shipping was particularly strong, driven by an increase in exports from the U.S.

Key takeaways

FedEx has reported positive earnings. For economists that look to FedEx as a measure of how the economy is doing, that’s a good sign.

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