FedEx released a disappointing forecast for 2019 on Tuesday — and now its stock is on track for its worst day in 10 years.
FedEx CEO Fred Smith insisted to investors on a call that the shoddy earnings report was caused by "bad political choices" that have led to a global economic slowdown. He called out Brexit, immigration in Germany, state-owned firms in China, and Donald Trump's tariff war.
"So you just go down the list, and they're all things that have created macroeconomic slowdowns," Smith said.
Smith also wrote off the idea that Amazon is a threat to their business.
"The prospects that this company (FedEx) is going to be 'disrupted' ... is fantastical," Smith said. "I'll leave it at that."
But analysts say FedEx shouldn't just ignore Amazon's efforts in expanding its own air fleet capacity and potentially transiting from FedEx. "It's obvious Amazon is going to continue to grow their air fleet," Kevin Sterling, managing director of Seaport Global Securities, told Business Insider.
Amazon depends on the delivery capacity of FedEx, as well as UPS, USPS, and others.
"I would simply say no one has benefitted more from the transportation networks built out by FedEx, UPS, and USPS than Amazon," Trip Miller, founder and managing partner of Gullane Capital, told Business Insider. (Disclosure: Gullane Capital has shares in Amazon and FedEx.) "Amazon can’t deliver on their Prime commitments without FedEx, UPS, and USPS."
And those shipping firms depend on Amazon as well. Miller said Amazon comprises around 3%-5% of FedEx's revenue, while Amazon's revenue percentage at UPS is around the low teens.
"They have a unique partnership," Miller said.
Amazon's own fleet is small but quickly growing
The e-commerce juggernaut has been building out its own cargo fleet, presently with around 40 cargo planes. That's pretty puny compared to FedEx Express' fleet of 675 aircraft and UPS with 247 cargo planes.
But Amazon is quickly expanding. Just last week, Amazon announced it will expand its 72,000-square-foot cargo facility at Chicago Rockford International Airport to 200,000 square feet. It also announced last week it would build a new regional hub at Fort Worth Alliance Airport, and a new sorting facility in Ohio's Wilmington Air Park.
That matches plans to expand its hub at Cincinnati/Northern Kentucky International Airport to three million square feet. The space could then accommodate more than 100 Amazon Air cargo planes.
Regardless, FedEx's Smith continues to hold that Amazon is nothing more than a customer.
"We don't see them as a peer competitor of ours for many reasons," he said.
It's indeed not likely, in the short term, that Amazon would become a third-party carrier like FedEx. Helane Becker, managing director and senior research analyst at Cowen, told Business Insider that Amazon's cargo fleet moves deliveries from its own fulfillment centers, rather than servicing other retailers as well.
What is more likely is Amazon building so much capacity that it lessens its dependence on FedEx and other freight haulers.
Even if that does happen, Sterling said FedEx is still set on the e-commerce front. Most retailers expanding their online shopping capabilities aren't also building out their own air fleet — like Walmart, for instance.
"Amazon is going to do their own thing, but there's going to be enough growth in e-commerce that they (FedEx and others) will be able to grow with companies outside of Amazon," Sterling said.
