FedEx delivers strong results on solid growth
FedEx said it remained optimistic about the economic outlook after solid growth in US and international markets helped the express delivery group lift fourth- quarter net profits by a better-than-expected 27 per cent.
Fred Smith, chairman and chief executive, said he saw no sign of weakening in the economy, brushing off concern that rising interest rates and high energy prices could stifle growth.
Mr Smith’s upbeat comments followed similar remarks last week by US rail industry executives, suggesting that the transportation sector, an important bellwether of economic growth, remained in a bullish mood.
FedEx has been among the world’s best-performing transportation companies for the past few years as growth in global trade has increased demand for its services.
Express delivery groups such as FedEx, UPS and DHL are taking an ever more central rolein the global economy as companies seek greater speed andreliability in their just-in-time supply chains.
FedEx’s average daily package volume was up 4 per cent, with growth evenly spread between domestic and international shipments and, in the US, between its air and ground networks.
Increased margins also contributed to fourth-quarter net profits of Dollars 568m, or Dollars 1.82 a share, which beat analysts’ consensus forecast of Dollars 1.77 a share. Revenues were up 10 per cent at Dollars 8.49bn.
Investors reacted to the strong results and upbeat outlook by pushing the group’s shares up more than 5 per cent to Dollars 113.86 by the close of trading.
“The near-term economy and parcel-pricing environment are favourable and the long-term growth potential in the global freight market is compelling,” said Jon Langenfeld, analyst at Robert W. Baird. Another source of strong growth was the group’s fast-expanding domestic trucking division, which handles heavier goods than the core smallpackage businesses and lifted volume by 15 per cent over the quarter.
FedEx Freight expandedits capacity in May by agreeing to buy Watkins Motor Lines,a long-distance trucking company, for Dollars 780m.
The acquisition came a year after UPS entered the road freight market by buying Overnite, another US trucking company, extending the rivalry between the world’s two largest package delivery groups.
FedEx, UPS and DHL have all expanded beyond the parcel market into freight and logistics services, although FedEx has remained the most focused on express delivery.
