FedEx predicts strong growth in 2012 after jump in profits
FedEx Corporation has reported a 33% improvement in its fourth quarter earnings thanks to improved demand, particularly in its US ground services and international express shipments. And, it said expectations were for strong growth in its 2012 fiscal year.
Fedex Corp’s results have been just ahead of Wall Street expectations with net income up to $558m for the three months, compared to $419m in last year’s fourth quarter.
With revenues up 12% for the quarter, to $10.55bn, FedEx said profits were improved in all sectors.
Particularly good performances have been seen in the US ground services segment and in international services. And, FedEx Freight has returned to profitability after merger with the company’s National LTL operations earlier this year.
FedEx chairman, president and CEO Frederick W Smith said strong customer demand, an improved economy and “decisive actions” made by his company to grow its business had brought increases in volume and yield across the board.
“With this positive momentum, moderate economic growth and subsiding cost headwinds, FedEx is well positioned to deliver strong earnings growth in fiscal 2012,” said Smith.
FedEx finished off the year with overall revenues up 13% year-on-year to $39.3bn for the four quarters of 2011. Net income of $1.45bn was up 23% on last year’s $1.18bn result.
Adjusted earnings per share for the full year 2011 were $4.90 per share, up from $3.76 a year ago.
Under current expectations for fuel prices and moderate growth in the global economy FedEx forecast an increase in share earnings next year to between $6.35 to $6.85 per share for fiscal 2012.
It is planning to put $4.2bn in capital spending into its network to support future growth, including orders for more aircraft, along with investment in facilities, vehicles and information technology.
Segments
FedEx Express – Revenue in the fourth quarter rose 13% to $6.63bn with operating income up 4% to $429m for the quarter. Margins were down slightly, to 6.5% compared to 7% the previous year. FedEx said its International Priority daily package volumes grew 6% led by exports from Asia, with revenue per package rising 8% thanks to favourable exchange rates and higher fuel surcharges. US domestic revenue per package grew 10% thanks to higher fuel surcharges, though daily package volumes were slightly lower.
FedEx Ground – Package volumes grew by 6% in the fourth quarter, helping a 15% increase in revenue, to $2.26bn for the quarter. Growth was driven by good demand in the business-to-business market and the FedEx Home Delivery service, while e-commerce helped push FedEx SmartPost’s average daily volumes to a 24% increase. Revenue per package increased 7% in the ground segment, including a 8% improvement in the SmartPost service thanks to fuel surcharges and growth in higher-yielding services.
FedEx Freight – a higher Less than Truckload yield saw the consolidated FedEx Freight division returning to a $42m operating income, after posting a $36m loss a year ago. Margins were slightly up (3.2% compared to 2.9% last year). Management actions and higher fuel surcharges saw a 13% increase in LTL yield, although cutting down on less profitable shipments brought an 8% decrease in average daily volumes. FedEx said last January’s combination of FedEx Freight and FedEx National LTL operations should drive a “substantial improvement” in operating results in 2012.
Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer, said: “FedEx Ground maintained its exceptional performance this quarter, increasing volume, yields and margins, while FedEx Freight returned to profitability. Even with higher planned capital spending in fiscal 2012, margins, cash flows and returns are expected to improve year over year.”
