What happened

Shares of FedEx (NYSE:FDX) gained 13% at the open on Wednesday after the transport and shipping giant reported better-than-expected quarterly results. The COVID-19 pandemic continues to weigh on the global economy, and with it shipping stocks, but FedEx is making progress managing through the crisis.

So what

After markets closed Tuesday, FedEx reported fiscal fourth-quarter earnings of $2.53 per share on revenue of $17.4 billion, easily besting consensus analyst estimates for $1.52 per share on sales of $16.5 billion. FedEx said that "virtually all revenue and expense line items" were affected by COVID-19, with commercial volumes down significantly but residential deliveries surging.

The company said it recorded about $125 million in extra operating costs in the quarter due to the need for added personal protection equipment, cleaning, and other pandemic-related expenses.

A FedEx plane on the runway.

Image source: FedEx.

"Though our fiscal fourth quarter performance was severely affected by the COVID-19 pandemic, I am extremely proud of the herculean efforts of our team members," CEO Frederick W. Smith said in a statement. "As a result of the strategic investments we have made to enhance our capabilities and efficiencies, FedEx is well positioned to support and benefit from the reopening of the global economy."

FedEx said it was not providing any earnings forecast for its fiscal 2021 due to uncertainty on the timing and pace of an economic recovery.

Now what

The results got Wall Street's attention, with FedEx shares receiving one upgrade and at least 10 price-target boosts from analysts on Wednesday morning. Indeed, investors weren't expecting much from FedEx heading into earnings season. The stock had a miserable performance in 2019 as the company invested in its network in anticipation of 2020 growth, and the pandemic has threatened to delay the payback on those investments.

As the company notes, it is too soon to say how quickly the economy can grow from here, though FedEx is seeing strong performance in trans-Pacific shipping. Dedicated shippers are also benefiting from airlines cutting back international flights, which eliminates passenger aircraft storage bins as a shipping competitor.

Even with Wednesday's surge, FedEx is up only slightly year to date, and the shares are down 25% over the past three years. The timing is uncertain, but for patient investors, this stock still has a lot of potential.