FedEx (FDX) on Amazon's (AMZN) Logistics Threat: What, Us Worry?

FedEx (Nasdaq: FDX) reported Q1 results on Wednesday night, with EPS and revenue topping results. The company also boosted the midpoint of its EPS outlook for fiscal 2016. However, there has been some chatter about Amazon.com (Nasdaq: AMZN) building up its own logistic fleet, which could hamper the operations of FedEx and peers like UPS (NYSE: UPS).

With FedEx's quarterly call last night, EVP for Market Development, Mike Glenn, commented: I’d also like to clarify some of the public discussion and speculation concerning Amazon adding some direct transportation capabilities. First, Amazon is a valuable customer that we worked with for many years and we expect to work with them for many years to come. We’ve been in constant dialogue with them to understand their transportation needs as they've experienced significant growth. We’ve been aware of Amazon’s need for supplemental capacity related to inventory management, which is driving some of the investments they are making in transportation.

While recent stories and reports of a new entity competing with the three major carriers in the United States grabs headlines, the reality is it will be a daunting task requiring tens of billions of dollars in capital and years to build sufficient scale and density to replicate existing networks like FedEx, Glenn noted.

Amazon has been struggling to meet demand from customers, which has put a heavier load on logistics partners. That has been evidenced in recent holiday selling seasons, where many customers were left in the cold amid missed package delivery timelines.

Last week, Amazon inked a deal with Air Transportation Services Group to lease 20 Boeing 767s. The company has also commenced an Uber-like delivery initiative for the "last mile" of deliveries to homes and businesses.

Amid commentary from FedEx, shares are indicated for a higher open Thursday.

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