FedEx Corp. founder Fred Smith vowed in January that 2020 would be the year his efforts to remake the parcel carrier for the e-commerce era would finally start to pay off — and the long run of disappointments for investors would come to an end. It appears he was right, even it took a significant helping hand from a global pandemic that no one saw coming.

With digital ordering increasingly becoming the default option for Americans reticent to leave their homes amid the coronavirus outbreak, FedEx on Tuesday turned in its best quarterly results in a long time. Analysts were primed for a good showing after rival United Parcel Service Inc. blew estimates out of the water when it last reported results in July; it turns out, they weren’t nearly optimistic enough. FedEx reported the highest adjusted operating margin for its fiscal first quarter since 2017. Revenue climbed more than 13% to $19.3 billion, a quarterly record for the company. Collectively, that translated into an earnings-per-share showing that was nearly double what analysts had been anticipating. 

“Our earnings growth underscores the importance of our business initiatives and investments over the last several years, and, in many ways, the world has accelerated to meet our strategies,” Smith, who is also CEO, said in the press release. He’s right: The billions of dollars that FedEx has poured into automation equipment and expanded weekend services has put the carrier in a prime position to capitalize on the country’s national appreciation of e-commerce as an essential service. But what’s helped FedEx and UPS the most is that the spike in e-commerce shipments was so sudden and pervasive that even their sprawling networks of planes and trucks are bursting at the seams. Chief Marketing Officer Brie Carere  told Bloomberg News in an interview this month that FedEx expects the U.S. market will reach 100 million packages a day by 2023, three years earlier than it had previously expected. Logistics capacity is tight — so much so that a group of retailers is trying to start a new shopping event in October in an effort to convince consumers to plan ahead for the holidays and help them avoid extra shipping fees and delays.

In the most basic illustration of supply-and-demand economics, this has created a remarkable opportunity for FedEx and UPS to start to reclaim the pricing power they had seemingly all but abandoned in the race to ensure they had a share of the booming e-commerce market. Both companies rolled out surcharges for their largest customers during the upcoming holiday season, a contrast to the past when they’ve foregone or limited such fees. FedEx earlier this week said it would raise rates across its services starting Jan. 4., with rates for express, ground and home-delivery packages rising by an average of 4.9%.

That changed dynamic has investors viewing FedEx in a whole new light. Consider the company’s update on Tuesday to its capital spending budget. It now expects to spend $200 million more in the current fiscal year than previously anticipated as it expands capacity to help meet the unrelenting demand. This will mark the fifth year in a row that FedEx’s capital expenditure budget has exceeded $5 billion. This time last year, that kind of forecast would have elicited more than a few eye rolls and prompted questions about where all this money was going year after year. On Tuesday, shares of FedEx rose as much as 10% in after-market trading. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.

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