FedEx Corp. Third Quarter Net Income Grows as Economy Strengthens
MEMPHIS, Tenn., March 18, 2010 ... FedEx Corp. (NYSE: FDX) today reported earnings of $0.76 per diluted share for the third quarter ended
February 28, compared to $0.31 per diluted share a year ago.
“Outstanding execution of our business strategy and an improving global economy drove solid financial performance in the third quarter,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer.
Third Quarter Results
FedEx Corp. reported the following consolidated results for the third quarter:
• Revenue of $8.70 billion, up 7% from $8.14 billion a year ago
• Operating income of $416 million, up 129% from $182 million last year
• Operating margin of 4.8%, up from 2.2% the previous year
• Net income of $239 million, up 146% from last year’s $97 million
Revenue and earnings increased as a result of higher shipment growth, particularly in international express and at FedEx Ground. Strict cost controls also benefited results. Increased net fuel costs, an operating loss at FedEx Freight and the partial reinstatement of certain employee compensation programs impacted the quarter’s results. One fewer operating day year over year at each of the transportation segments also negatively affected results.
FedEx expects earnings per share of $1.17 to $1.37 per diluted share in the fourth quarter, and $3.60 to $3.80 for fiscal 2010, which reflect the current market outlook for fuel prices and a continued modest recovery in the global economy. Previously, the company expected earnings per share of $3.45 to $3.75 for fiscal 2010. The company reported a loss of $2.82 per share in last year’s fourth quarter, which included $3.46 per share of charges primarily related to the impairment of goodwill. The company’s capital spending forecast for fiscal 2010 is now $2.9 billion, up from $2.6 billion, due to additional investments in Boeing 777 aircraft.
“In the fourth quarter, we expect to grow our revenue and earnings through increased demand for our superior services. Yield management will continue to be a top priority across all of our operating companies,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “With our improved performance and outlook, we are reinstating various employee compensation programs, which will dampen earnings growth in the fourth quarter and fiscal year 2011. We are also continuing to invest in long-term projects that improve service and reduce operating costs, such as long-range, fuel-efficient 777 freighters.”
FedEx Express Segment
For the third quarter, the FedEx Express segment reported:
• Revenue of $5.44 billion, up 8% from $5.05 billion a year ago
• Operating income of $265 million, up from $45 million last year
• Operating margin of 4.9%, up from 0.9% the previous year
Led by exports from Asia, FedEx International Priority® (IP) average daily package volume increased 18% and IP freight revenue increased 49%. U.S. domestic average daily package volume grew 1%, while revenue per package declined slightly.
Operating profit and margin improvements were driven by volume and revenue growth, particularly in higher-margin IP package and IP freight
services, as well as continued actions to control spending.
FedEx Ground Segment
For the third quarter, the FedEx Ground segment reported:
• Revenue of $1.91 billion, up 7% from last year’s $1.79 billion
• Operating income of $258 million, up 32% from $196 million a year ago
• Operating margin of 13.5%, up from 10.9% the previous year
FedEx Ground average daily package volume grew 5% year over year, primarily due to growth in the business-to-business market. Yield improved 2% primarily due to higher package weight. FedEx SmartPost average daily volume grew 46% due primarily to market share gains.
Operating income and margin increased due to higher package volume and yield, lower self-insurance expenses and improved performance at FedEx SmartPost.
FedEx Freight Segment
For the third quarter, the FedEx Freight segment reported:
• Revenue of $1.04 billion, up 14% from last year’s $914 million
• Operating loss of $107 million, compared to an operating loss of $59 million a year ago
• Operating margin of (10.3%), compared to (6.5%) the previous year
Less-than-truckload (LTL) average daily shipments increased 26% and LTL yield declined 8% year over year due to the effects of discounted pricing. Operating loss increased in the quarter due to lower yields and higher purchased transportation costs.
FedEx Freight and FedEx National LTL implemented a 5.9% general rate increase on February 1, 2010 and are aggressively pursuing opportunities to increase yields.
FedEx Services Segment
FedEx Services segment revenue for the third quarter, which included the operations of FedEx Office, was down 11% year over year, due to declines in copy product revenues and the September 1, 2009 realignment of FedEx SupplyChain Systems to the FedEx Express reporting segment.
FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $33 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world’s most admired and trusted employers, FedEx inspires its more than 280,000 team members to remain “absolutely, positively” focused on safety, the highest ethical and professional standards and the needs of their customers and communities. For more information, visit news.fedex.com.
Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and third quarter fiscal 2010 Statistical Book. These materials, as well as a Webcast of the earnings release conference call to be held at 8:30 a.m. EDT on March 18 are available on the company’s Web site at www.fedex.com/us/investorrelations. A replay of the conference call Webcast will be posted on our Web site following the call.
Certain statements in this press release may be considered forward-looking statements, such as statements relating to management’s views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, legal challenges or changes related to FedEx Ground’s owner-operators, new U.S. domestic or international government
regulation, the impact from any terrorist activities or international conflicts, our ability to effectively operate, integrate and leverage acquired businesses, changes in fuel prices and currency exchange rates, our ability to match capacity to shifting volume levels and other factors which can be found in FedEx Corp.'s and its subsidiaries’ press releases and filings with the SEC.