FedEx Corporation (Memphis) reported earnings of $1.65 per diluted share for the third quarter ended February 29, which includes a $0.10 per share reversal of a reserve associated with a legal matter at FedEx Express. Last year’s third quarter earnings were $0.73 per diluted share, which included $0.08 per diluted share in costs related to the combination of the company’s FedEx Freight and FedEx National LTL operations. Excluding these one-time items, earnings were $1.55 per diluted share in the third quarter, compared to $0.81 per diluted share a year ago.
FedEx Corporation reported the following consolidated results for the third quarter:
• Revenue of $10.56 billion, up 9% from $9.66 billion the previous year
• Operating income of $813 million, up 107% from $393 million last year
• Operating margin of 7.7%, up from 4.1% the previous year
• Net income of $521 million, up 126% from $231 million a year ago
Operating income improved due to the continued strong performance of FedEx Ground driven by higher yields and volumes, as well as significantly improved results at FedEx Freight. Operating income also reflects the positive year-over-year impact, predominately at FedEx Express, of a benefit from the timing lag that exists between when fuel prices change and when indexed fuel surcharges automatically adjust. The company also benefitted from a lower tax rate and mild winter weather.
FedEx projects earnings to be $1.75 to $2.00 per diluted share in the fourth quarter and an adjusted $6.35 to $6.60 per diluted share for fiscal 2012. This guidance assumes the current market outlook for fuel prices and moderate growth in the global economy. Including the FedEx Express legal reserve reversal, earnings are expected to be $6.43 to $6.68 per diluted share for fiscal 2012. The company reported earnings of $1.75 per diluted share in last year’s fourth quarter. The capital spending forecast for fiscal 2012 remains $4.2 billion.
For the third quarter, the FedEx Express segment reported:
• Revenue of $6.54 billion, up 8% from last year’s $6.05 billion
• Operating income of $349 million, up 96% from $178 million a year ago
• Operating margin of 5.3%, up from 2.9% the previous year
U.S. domestic revenue per package grew 9% due to higher rate per pound and fuel surcharges, while average daily package volume decreased 4%. International priority (IP) revenue per package grew 5% due to higher fuel surcharges and package weights, while average daily package volume decreased 1%. IP freight average daily pounds increased 4% with revenue per pound up 2% due to higher fuel surcharges. In total, IP average daily package and freight pounds increased 2% and revenue increased 6% year-over-year.
Operating income and margin improved in the quarter, reflecting the year-over-year benefit of the fuel surcharge timing lag and the reversal of a $66 million reserve associated with a legal matter. One additional operating day benefitted this year’s results, while prior year results were negatively impacted by severe winter weather.
Copyright Photo: Brian McDonough.
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