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FedEx improves profit margins for Q2

FedEx Corp. reported a higher net income of US$500 million for the second quarter ended November 30, up 14 percent from last year’s $438 million, as a result of improved performance and cost management.

In addition, last year’s second quarter results were impacted by the effects of Superstorm Sandy, said the Memphis-based U.S. express delivery giant in a statement.

Results fell short of analysts’ estimates as the express delivery service showed a small decline in revenue.

“FedEx posted solid second-quarter earnings, reflecting improved performance at FedEx Express, as the profit improvement plan introduced more than a year ago continues to gain momentum,” said Frederick Smith, FedEx chairman, president, and chief executive officer.

Aggregate revenue totaled $11.4 billion in the second quarter, up 3 percent from $11.1 billion the previous year. Operating income was $827 million, a 15 percent spike from $718 million last year, while operating margin was 7.3 percent, an improvement of 6.5 percent over the previous year.

“Operating income and margin increased primarily due to yield and cost management at FedEx Express,” according to the statement. “Results also benefited from the favorable comparison to last year’s Sandy-impacted results, lower pension expense and a modest benefit from the voluntary employee severance program.”

FedEx is increasing its forecast of full-year earnings to 8 percent to 14 percent above last year’s adjusted results, compared to its previous growth range of 7 percent to 13 percent.

“We remain on track to deliver a solid increase in earnings this fiscal year,” said Alan Graf, Jr., FedEx executive vice president and chief financial officer. “FedEx Express reported significant year-over-year improvement in earnings during the quarter, aided by continued execution of our profit improvement programs and by ongoing cost reduction initiatives.”

By division, the express segment, FedEx’s biggest unit, saw its revenue decrease slightly due to lower express freight revenue and lower fuel surcharges.

Operating income and margin improved year-over-year due to higher base package yields, lower pension expense, and lower net expenses from ongoing cost reduction activities.

The ground segment reported an 8 percent growth in average daily volume in the second quarter, driven by market share gains. Revenue per package increased 2 percent due to rate increases and higher residential surcharges, partially offset by lower fuel surcharges.

Operating income increased due to higher volume and revenue per package. Operating margin declined primarily due to this year’s later start of the holiday shipping season.

For the second quarter, the freight division posted increases in less-than-truckload (LTL) average daily shipments and weight per shipment of 4 percent and 2 percent, respectively. LTL revenue per hundredweight decreased 1 percent due to lower fuel surcharges, higher weight per shipment, and shorter length of haul.

Operating income improved slightly as revenue gains from increased shipments and weight per shipment were partially offset by higher purchased transportation costs.


Photo: (401)K 2013


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