FedEx Net Income Gains in Fiscal 4th Qtr.

This story appears in the June 23 print edition of Transport Topics.

A stronger result from FedEx Freight provided the greatest impetus last week for parent FedEx Corp.’s fiscal fourth-quarter earnings to rise to $730 million.

The Freight unit rode a 12% increase in less-than-truckload shipments to post income of $122 million before interest and taxes. That is a $41 million improvement, excluding one-time charges in the year-earlier period. Its revenue also gained 12% to $1.55 billion.

On that same basis, profit at FedEx Ground increased $29 million to $586 million as volume rose 8%, and climbed $15 million to $475 million at FedEx Express, which is the Memphis, Tennessee-based company’s largest business.

Companywide for the period, ended May 31, net income of $730 million was up from $679 million, or $2.13 per share, excluding one-time charges in the same year-ago period, and up from $303 million, or 95 cents, including those expenses related primarily to operational changes and job cutbacks, FedEx said June 18.

Revenue increased 3% to $11.8 billion.

For the year, the company’s net income was $2.10 billion, or $6.75, compared with $1.98 billion, or $6.23, excluding charges, and up from $1.56 billion, or $4.91, including them. The costs totaled $420 million after taxes.

Revenue was $45.6 billion compared with $44.3 billion.

“An outstanding fourth quarter helped FedEx post solid results for fiscal 2014, and we believe we are well-positioned for a strong fiscal  2015,” CEO Frederick Smith said in a statement.

FedEx, which ranks No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers in the United States and Canada, set a 2015 profit target of between $8.50 and $9 per share — as much as 33% above current results.

“We anticipate revenue and earnings growth from ongoing improvements in all of our transportation segments with moderate global economic growth,” Chief Financial Officer Alan Graf said on a conference call, setting a goal for profit growth in each unit at more than 10%.

“We believe our outlook is realistic and achievable,” he said.

Graf said a recent 3% increase in fuel surcharges will help the Freight unit’s future results.

FedEx Freight President Bill Logue said on the call, “We are very pleased with this quarter. Our focus is on balance and really going after a good balance of yield and volume. That will continue as we march towards our objective of double-digit margins.”

The unit’s profit improvement was attributed to offering multiple service levels, enhanced service quality and an increase in freight from small and midsize customers.

The Freight operating ratio was 92.1, the best the LTL operation has posted in nearly seven years, and a 2.1 percentage point year-over-year improvement. LTL results were achieved despite one fewer operating day in the quarter.

Freight revenue increased to $1.55 billion from $1.39 billion. Besides shipment increase, the other contributors to revenue improvement were a 2% rise in weight per shipment and unspecified cost improvements, the statement said.

Shipments increased 14% for the priority service, while economy shipments increased 7%.

Revenue per 100 pounds of freight was steady at $19.66, down 2 cents from the prior-year period. Priority LTL revenue rose 10 cents per 100 pounds, and economy business revenue fell 14 cents.

Ground revenue improved 8% to $3.01 billion, mostly because of the volume increase tied to Internet commerce, the company said. Ground package revenue of $2.78 billion was up 9%, and SmartPost revenue rose 2% to $236 million.

Rates on ground packages were 2% higher. The Smart Post volume fell 8%, but revenue rose by a similar amount, mostly due to price increases.

At Ground, the operating ratio slipped slightly to 80.5 from 79.9, excluding one-time costs.

The Express business revenue inched up to $7 billion from $6.98 billion. The operating income improvement of 3% to $475 million was helped by increased volume and package pricing and was hurt by increased fuel costs as well as lower freight revenue.

In the Express unit, economy business accounted for $81 million of the $83 million revenue increase. The higher economy shipment revenue was almost equally split between domestic and international business driven by customers who continued to choose lower-priced shipping options.

Freight revenue in the Express unit slipped $82 million to $1.03 billion, primarily because of a falloff in the United States.