FedEx reaffirms outlook, rate hike plan as earnings surge in 1Q

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FedEx_ViewMemphis, Tennessee-based FedEx Corp. reported earnings per diluted share of US$2.10 for the first quarter ended August 31, up 37 percent from last year’s $1.53 per share.

Consolidated net income soared to US$606 million for the period, up 24 percent from last year’s $489 million, spurred by volume and yield growth at all of its three logistics units.

With the income expansion, the company reaffirmed its earnings target for fiscal year 2015 and its planned rate increase early next year.

“FedEx Corp. is off to an outstanding start in fiscal 2015, thanks to very strong performance at FedEx Ground, solid volume and revenue increases at FedEx Freight and healthy growth in U.S. domestic volume at FedEx Express,” said CEO Frederick W. Smith, also the group chairman and president.

Consolidated revenue for the period was $11.7 billion, up 6 percent from $11 billion in the same period the previous year. Operating income went up to $987 million, reflecting a 24 percent improvement over the $795 million posted last year, while operating margin reached 8.5 percent, higher by 7.2 percent over the previous year.

“Operating income increased primarily due to higher volumes and increased yields at all three transportation segments,” a company statement declared. “Results in the first quarter also include benefits from lower pension expense and the company’s profit improvement programs. These benefits were partially offset by higher aircraft maintenance expense due to the timing of certain engine maintenance events.”

By division, the express segment reported first-quarter revenue of $6.86 billion, up 4 percent from last year’s $6.61 billion. Operating income surged to $369 million, up 35 percent from $273 million a year ago, and operating margin of 5.4 percent was up from 4.1 percent the previous year.

Ground performance pushed revenue up 8 percent to $2.96 billion from last year’s $2.73 billion. Operating income totaled $545 million, up 13 percent from $483 million a year ago, while operating margin went up to 18.4 percent, up from 17.7 percent the previous year.

Freight segment for the first quarter saw revenue of $1.61 billion, up 13 percent from last year’s $1.42 billion. Operating income of $168 million was 70 percent higher than $99 million a year ago, and operating margin of 10.4 percent was an increase from the 7 percent of the previous year.

Looking forward, FedEx reaffirmed its fiscal 2015 earnings forecast of $8.50 to $9 per diluted share, based on an outlook that assumes “no net year-over-year fuel impact and continued moderate economic growth.”

“FedEx reported strong first quarter results, as all three of our transportation segments drove higher revenues and improved profitability year over year,” said Alan B. Graf, Jr., group executive vice president and chief financial officer. “Our profit improvement programs are progressing as planned and we continue to expect strong earnings growth this year.”

2015 rate increases

As previously announced, the airfreight, trucking, and freight divisions will increase shipping rates effective January 5, 2015.

Shipping rates will go up by an average of 4.9 percent for U.S. domestic, U.S. export, and U.S. import services.

Ground and home delivery will increase shipping rates by an average of 4.9 percent. In addition, as announced in May, ground will also begin applying dimensional weight pricing to all shipments.

Freight will increase shipping rates by an average of 4.9 percent, applicable to freight shipments within the U.S., between the contiguous U.S. and Canada, within Canada, between the contiguous U.S. and Mexico, and within Mexico.