FedEx Profits Rise 1% But Miss Analyst Targets
FedEx Corp. reported profits rose about 1.3% for its fiscal second quarter versus one year ago, but earnings before tax and interest dropped 13% in the freight division, according to company earnings released Dec. 20.
Net income, excluding one-time charges, was $700 million, or $2.59 per share, for the period that ended Nov. 30. One year ago, the company reported $691 million in earnings, or $2.44 per share.
“FedEx increased revenues and operating income despite continued low growth rates in the global economy. We are in the home stretch of our peak shipping season, and our service levels are high,” FedEx Chairman and CEO Fred Smith said. “The integration of TNT Express into our broad portfolio of global business solutions is proceeding smoothly and according to plan.”
Revenue rose 20% to $14.9 billion from $12.5 billion year-over-year, including gains in each division within the company. FedEx Express, the largest division, reported revenue rose 2% to $6.7 billion. FedEx Ground, the second largest, reported a 9% jump to $4.4 billion. FedEx Freight reported a 3% increase to $1.6 billion, and revenue for domestic and international freight sent through the FedEx Express segment rose 5% to $1 billion.
“We are making major systems investments at FedEx Freight which will result in significant margin improvement by year-end FY2020. We believe this initiative will change the LTL landscape in a major way,” Smith said, although he didn’t provide specifics on a conference call with investors.
Domestic package revenue rose to $3 billion compared with $2.9 billion one year ago, and yield per package climbed 3% to $17.39, although volume dropped 1% to $2.71 million for the quarter. International package revenue and yield increased between 1-2% to $2.05 billion and $54.37 respectively.
FedEx Freight produced mixed results in the fiscal second quarter. Average daily less-than-truckload shipments rose 3.7%, almost entirely based on an increase on priority freight shipping. However, weight per LTL shipment dropped 1.5% year-over-year, affecting both priority and economy freight. Revenue per shipment remained relatively unchanged, but revenue per 100 pounds of freight increased 1.6% to $20.25.
“[FedEx] Freight’s competitive advantage, having the fastest published transit times in the LTL industry, is driving higher growth in its priority service,” FedEx Chief Financial Officer Alan Graf said. “Freight continues to face a difficult macroenvironment and is working to manage costs and increase yields.”
Earnings before tax and interest also rose 2.6% to $1.17 billion versus one year prior, but it only came out ahead due to the $70 million from TNT Express, the Dutch firm FedEx acquired May 25. Excluding the TNT results, the company would have reported earnings before tax and interest fell 3.5% to $1.1 billion. FedEx Express was the sole winner among the segments with a 2% increase to $636 million. FedEx Ground reported earnings before tax and interest fell 12% to $465 million year-over-year. FedEx Freight had a 13% decline to $88 million because of higher information technology expenses, the company told investors.
In 2017, FedEx projects that U.S. gross domestic product, or the total value of all goods and services less production costs, will increase 2.2%, and global GDP will rise 2.6%. But the company didn’t provide a fiscal 2017 full-year forecast, citing the inability to predict adjustments in the value of pension contributions it makes for retirees.
The Memphis, Tennessee-based carrier, which ranks No. 2 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, fell 9 cents short on earnings, based on a survey of analysts from Bloomberg News. The company was $15 million short on projections for net income and even on revenue.
