FedEx Corporation (FedEx Express) (Memphis) reported earnings of $2.14 per diluted share for its fiscal second quarter ended November 30, up 36% from last year’s $1.57 per share. The corporation reported net income of $616 million, up 23% from last year’s $500 million. However the corporation missed several analyst profit estimates despite declining fuel costs.
The company issued this statement:
“FedEx posted strong results and a higher operating margin in the second quarter, with continued growth in volumes and base yields in each of our transportation segments”
“FedEx posted strong results and a higher operating margin in the second quarter, with continued growth in volumes and base yields in each of our transportation segments,” said Frederick W. Smith, FedEx Corporation chairman, president and chief executive officer. “We are in the final stages of this year’s peak shipping season, and I’d like to thank the more than 300,000 dedicated team members around the world for once again delivering outstanding service to our customers during the holidays.”
Second Quarter Results
FedEx Corp. reported the following consolidated results for the second quarter:
• Revenue of $11.9 billion, up 5% from $11.4 billion the previous year
• Operating income of $1.01 billion, up 22% from $827 million last year
• Operating margin of 8.5%, up from 7.3% a year ago
• Net income of $616 million, up 23% from last year’s $500 million
Operating income and margin increased primarily due to higher volumes and base yields in all three transportation segments. Results in the second quarter also included benefits from the company’s profit improvement programs, lower pension expense and a slightly positive net impact from fuel. These benefits were partially offset by higher aircraft maintenance expense due to the timing of aircraft maintenance events.
Share repurchases benefited second quarter earnings by $0.16 per diluted share.
The company reaffirms its fiscal 2015 earnings forecast of $8.50 to $9.00 per diluted share. The outlook assumes continued moderate economic growth and a modest net benefit from fuel. The capital spending forecast for fiscal 2015 remains $4.2 billion.
FedEx regularly reviews its fuel surcharge tables and will update certain tables at FedEx Express, FedEx Ground and FedEx Freight effective February 2, 2015. Details on these changes will be available on fedex.com by December 23, 2014.
FedEx Express Segment
For the second quarter, the FedEx Express segment reported:
• Revenue of $7.02 billion, up 3% from last year’s $6.84 billion
• Operating income of $484 million, up 36% from $357 million a year ago
• Operating margin of 6.9%, up from 5.2% the previous year
Revenue increased due to higher U.S. domestic package volume and international export package base revenue, partially offset by lower fuel surcharges and exchange rates. U.S. domestic package volume grew by 7%, including a 10% increase in U.S. overnight box. U.S. domestic revenue per package declined 2% due to decreased fuel surcharges and lower weight.
FedEx International Economy® volume grew 5%, while FedEx International Priority® volume increased 1%. International export revenue per package was flat, as higher rates were offset by unfavorable currency exchange and lower fuel surcharges.
Operating results improved due primarily to U.S. domestic and international export package revenue growth, cost management related to profit improvement programs, lower pension expense and a slight net benefit from fuel. These improvements were partially offset by the timing of higher aircraft maintenance expense. The year over year increase in aircraft maintenance expense is expected to subside beginning in the fourth fiscal quarter.
FedEx Ground Segment
For the second quarter, the FedEx Ground segment reported:
• Revenue of $3.06 billion, up 8% from last year’s $2.85 billion
• Operating income of $465 million, up 6% from $439 million a year ago
• Operating margin of 15.2%, down from 15.4% the previous year
FedEx Ground average daily volume grew 5% in the second quarter, driven by growth in both business-to-business and FedEx Home Delivery services. Revenue per package increased 3% due to rate increases and higher residential surcharges. FedEx SmartPost average daily volume decreased 4% due to the reduction in volume of a major customer. FedEx SmartPost revenue per package increased 7% due to rate increases and improved customer mix, partially offset by higher postage rates.
Operating income increased due to higher revenue per package and volume, partially offset by higher network expansion costs, as the company continues to heavily invest in the FedEx Ground and FedEx SmartPost businesses.
FedEx Freight Segment
For the second quarter, the FedEx Freight segment reported:
• Revenue of $1.59 billion, up 11% from last year’s $1.43 billion
• Operating income of $112 million, up 35% from $83 million a year ago
• Operating margin of 7.1%, up from 5.8% the previous year
Less-than-truckload (LTL) average daily shipments increased 8%, including a 10% increase in demand for Priority service. LTL revenue per shipment grew 3% due to higher weight per shipment, higher rates and increased fuel surcharges.
Operating results improved due to increased LTL revenue per shipment and higher average daily LTL shipments.
Copyright Photo: Jay Selman/AirlinersGallery.com. Monday, December 15, was the busiest day for FedEx in its history according to the company. Cutting through the early morning mist at Charlotte is Airbus A300B4-622R (F) N719FD (msn 388) bound for the Memphis cargo hub.
FedEx Express aircraft slide show: