FedEx Quarterly Profits Decline on TNT Cyberattack, Hurricane Harvey
FedEx Corp. remained profitable during the three months ended Aug. 31, but at a lower level than a year ago as the Memphis, Tenn.-based carrier had to overcome challenges from a malware infestation in Europe and from Hurricane Harvey in southeast Texas.
FedEx earned $596 million, or $2.19 a share, on revenue of $15.3 billion during its first fiscal quarter, the company reported Sept. 19. During the same period in 2016 the company had net income of $715 million, or $2.65, on global sales of $14.66 billion.
The company’s three main divisions — Express, Ground and Freight — all posted quarterly gains in revenue, year-over-year. While Ground and Freight also boosted profits, Express had a decline in operating income because of Harvey’s effects.
“The first quarter posed significant operational challenges due to the TNT Express cyberattack and Hurricane Harvey, and I want to thank our team members for their extraordinary dedication and performance,” Chairman and CEO Frederick Smith said in the earnings statement.
“We are confident of our prospects for long-term profitable growth, and we reaffirm our commitment to improve operating income at the FedEx Express segment by $1.2 billion to $1.5 billion in fiscal 2020 versus fiscal 2017,” Smith added.
FedEx ranks No. 2 on the Transport Topics Top 100 list of for-hire carriers.
Smith and other executives said during the earnings call that on June 27 FedEx’s TNT Express subsidiary was attacked by hackers who inserted malware in TNT servers in Ukraine.
Chief Information Officer Rob Carter said the virus was contained within TNT and did not transfer to other FedEx divisions or to the company’s customers.
FedEx estimated the damage, mainly lost revenue, at $300 million, or 79 cents a share.
The Ground division had 8% growth in revenue but 9% growth in quarterly expenses. Operating income rose to $626 million from $610 million, but operating ratio — expenses as a percentage of revenue — deteriorated slightly to 86.5 from 85.8.
The Freight division, North America’s largest less-than-truckload carrier, posted gains in quarterly revenue, operating income, margin and revenue per hundredweight.
Capital expenditure for the year is estimated at $5.9 billion.
The company also announced a rate increase the same day.
