FedEx Corp. reports first quarter earnings
FedEx Corp. reported earnings of USD 1.23 per diluted share for the first quarter ended August 31, compared to USD 1.58 per diluted share a year ago.
FedEx Corp. reported the following consolidated results for the first quarter:
• Revenue of USD 9.97 billion, up 8pct from USD 9.20 billion a year ago
• Operating income of USD 630 million, down 23pct from USD 814 million last year
• Operating margin of 6.3pct , down from 8.8pct the previous year
• Net income of USD 384 million, down 22pct from last year’s USD 494 million
Total combined average daily package volume in the FedEx Express and FedEx Ground segments grew 1pct year over year for the quarter. Growth in ground, FedEx SmartPost and international domestic express shipments was substantially offset by a continued decline in U.S. domestic express shipments.
Operating results declined, as strong cost management actions were more than offset by global economic weakness, higher fuel prices and the related negative effects of higher fuel surcharges. One fewer operating day at each of the transportation segments also negatively affected results. While fuel prices decreased from historic highs late in the quarter, the average price of jet fuel was up 77pct year over year.
Outlook
FedEx expects earnings to be USD 1.40 to USD 1.60 per diluted share in the second quarter compared to USD 1.54 a year ago. For the full year, the company reaffirms its earnings estimate of USD 4.75 to USD 5.25 per diluted share, which reflects weaker global macroeconomic conditions. This guidance incorporates current fuel prices and the related impact on fuel surcharges, which are reducing demand for FedEx services and adversely affecting base rates across the company’s transportation segments. Management has reduced the company’s capital plan to USD 2.6 billion for fiscal 2009.
2009 Rate Increase
FedEx Express will increase shipping rates by an average of 6.9pct for U.S. and U.S. export services, effective January 5, 2009. The rate increase will be partially offset by adjusting the fuel price at which the fuel surcharge begins, reducing the fuel surcharge by two percentage points. Additional changes will be made to other FedEx Express surcharges, details of which can be found at www.fedex.com/us/2009rates. The FedEx Ground rate and surcharge increases for 2009 will be announced later this year.
FedEx Express Segment
For the first quarter, the FedEx Express segment reported:
• Revenue of USD 6.42 billion, up 9pct from USD 5.89 billion a year ago
• Operating income of USD 345 million, down 34pct from USD 519 million last year
• Operating margin of 5.4pct , down from 8.8pct the previous year
Operating results were impacted by global economic weakness, higher fuel prices and the related negative effects of higher fuel surcharges, and one fewer operating day. These factors more than offset the benefits of aggressive cost containment activities, including volume-related reductions in flight hours, labor hours, fuel consumption and maintenance costs and decreases in variable incentive compensation.
FedEx International Priority® (IP) package revenue grew 12pct for the quarter, driven by 14pct growth in revenue per package primarily due to higher fuel surcharges and favorable exchange rates. IP average daily package volume was flat, while FedEx International Priority Freight® daily pounds grew 14pct . U.S. domestic revenue per package increased 13pct due to higher fuel surcharges. U.S. domestic package volume declined by 5pct .
Earlier this month, FedEx Express announced it has upgraded its next-business-day delivery IP service from Europe to major U.S. East Coast cities. FedEx Express has also announced the introduction of FedEx Express Nacional, a domestic next-business-day service that provides highly reliable, convenient and quality express shipping solutions across Mexico.
FedEx Ground Segment
For the first quarter, the FedEx Ground segment reported:
• Revenue of USD 1.76 billion, up 9pct from last year’s USD 1.62 billion
• Operating income of USD 196 million, up 3pct from USD 190 million a year ago
• Operating margin of 11.1pct , down from 11.7pct the previous year
Average daily ground package volume grew 4pct year over year in the first quarter, primarily due to the continued growth of the FedEx Home Delivery® service. Yield improved 6pct primarily due to fuel surcharges. FedEx SmartPost revenue increased 14pct , while average daily volume grew 9pct .
Operating income was modestly higher, as revenue growth and lower other operating expenses offset higher fuel prices and a competitive pricing environment. There was one fewer operating day in this year’s first quarter.
FedEx Freight Segment
For the first quarter, the FedEx Freight segment reported:
• Revenue of USD 1.35 billion, up 10pct from last year’s USD 1.23 billion
• Operating income of USD 89 million, down 15pct from USD 105 million a year ago
• Operating margin of 6.6pct , down from 8.5pct the previous year
Less-than-truckload (LTL) average daily shipments increased 4pct year over year due to market share gains, despite the weak U.S. economy and a competitive pricing environment. LTL yield improved 5pct year over year primarily due to increased fuel surcharges.
Operating results decreased in the quarter due to the weak economy and the competitive pricing environment. There was one fewer operating day in this year’s first quarter.
FedEx Services Segment
FedEx Services segment revenue, which includes the operations of FedEx Office and FedEx Global Supply Chain Services, was down 2pct year over year, as declines in copy revenues exceeded revenue generated from FedEx Office locations opened in the last year.
