Tennessee-based FedEx’s earnings fell short of expectations as the group reported adjusted results for its fiscal fourth quarter of US$2.66 per diluted share (below industry estimates of $2.68), compared to adjusted earnings of $2.54 per diluted share a year ago.
Without adjustments, the logistics giant reported a loss of $3.16 per diluted share for the fourth quarter compared to a profit of $2.62 per diluted share a year ago.
The firm’s performance in the fourth quarter ended May 31, 2015 was dragged down by pension costs, a stronger dollar, and lower fuel surcharges.
The group’s adjusted operating income in the quarter improved 5%, as all three transportation segments reported yield growth, ground and U.S. domestic express volumes grew, and profit improvement initiatives bore fruit.
These improvements offset higher employee incentives and the unfavorable impact of lower fuel surcharges and weather fluctuations, said the company.
For the full fiscal year 2015, unadjusted earnings amounted to $3.65 per diluted share, compared to $7.48 per diluted share last year. With adjustments, earnings were $8.95 per diluted share, compared to $7.05 per diluted share a year ago.
Adjusted operating results for the year increased sharply on higher volumes and yields in all three transportation segments, profit improvement efforts, and favorable net fuel impact. This was partially offset by increased worker incentives and higher aircraft maintenance expense.
“Fiscal 2015 was a transformative year for FedEx with outstanding financial results driving expanded long-term value for shareowners,” said Frederick W. Smith, group chairman. “Significant acquisitions announced in the year promise to strengthen our portfolio of services and change what’s possible for customers. I am very proud of the FedEx team for its accomplishments and look forward to a successful fiscal 2016.”
On performance per business unit in the fourth quarter, the express division saw revenue decrease 4% as lower fuel surcharges and currency exchange variables offset yield and volume growth. International export volume was down 1%, and export revenue per package decreased 8%.
Adjusted operating results improved due to higher yield and U.S. domestic volume growth, profit improvement program initiatives, and lower international expenses from currency exchange rates. These benefits were partially offset by an unfavorable net fuel impact, higher incentive compensation, and negative impact from weather.
For the ground segment, revenue increased due to the inclusion of results from Genco, the third party logistics provider FedEx had acquired in January, and higher volume and revenue per package. Yield increased 2% on higher weight charges and increased rates, partially offset by lower fuel surcharges. Operating margin declined with the inclusion of Genco results and increased self-insurance reserves.
Meanwhile, the freight unit reported that less-than-truckload (LTL) revenue per shipment improved 2% due to higher rates that were significantly offset by lower fuel surcharges. LTL average daily shipments were flat. Operating results improved owing to higher LTL revenue per shipment.
Looking ahead to fiscal 2016, FedEx predicts that, assuming moderate economic growth, adjusted earnings will reach $10.60 to $11.10 per diluted share, driven by continued price increases and gains from profit improvement drives.
“Our operating performance significantly improved in fiscal 2015 as we focused on revenue quality and executed on our profit improvement program initiatives,” said Alan B. Graf, Jr., group executive vice president and chief financial officer. “We expect strong earnings growth in fiscal 2016 as we continue to focus on improving performance and successfully executing our profit improvement initiatives.”
