What Does FedEx's Earnings Miss Mean For Amazon? 'Expect Some Share Gains'

FedEx Corp FDX shares fell last week after the company reported weak preliminary results. Although the FedEx miss suggests softness across e-commerce as a whole, BofA Securities analysts see opportunity in Amazon.com Inc AMZN.

What Happened: FedEx said its fiscal first-quarter results were adversely impacted by global volume softness that accelerated in the final weeks of the quarter. As a result, the company withdrew its fiscal year 2023 earnings forecast and said it expects business conditions to weaken further in the second quarter.

FedEx said it will be reducing global flight volumes, reducing labor hours , and pushing back hiring plans to help cut costs in anticipation of a global recession. Amazon shares fell in sympathy with FedEx, but BofA analysts expect the e-commerce giant to take market share amid the slowdown.

"Although Fedex's announcement is a negative read for eCommerce, we see several reasons why Amazon may be less impacted than peers," BofA analysts wrote in a note to clients.

Why It Matters: Amazon previously partnered with FedEx for delivery, but the e-commerce giant no longer ships products via FedEx. Amazon also has more than 50% of total volumes in the U.S., BofA said. 

Amazon's average customer is likely in a higher-income bracket than the average customer at Walmart Inc WMT, Target Corp TGT and EBay Inc EBAY. The company also didn't see any signs of consumers trading down on discretionary items during the second quarter, BofA added.

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"With Amazon’s wide third party selection and fast delivery speeds, we expect some share gains from competitors that may be using FedEx ... though volumes would not be immune to a recession, we would expect added 3Q strength vs the industry due to Prime Day," BofA said.

Amazon has faced depressed margins in recent years as shipping and other inventory-related costs increased during the pandemic. 

"Assuming global supply and demand moves back in balance, we would anticipate lower shipping costs in 2023, which could be more evident next year as shipping contracts are renewed," BofA said.

BofA Securities analysts reaffirmed Amazon with a Buy rating and a $170 price target.

AMZN Price Action: Amazon has a 52-week high of $188.11 and a 52-week low of $101.26.

The stock was up 0.91% to close at $124.66 on Monday.

Photo: courtesy of Amazon.