FedEx Corp. Reports Strong Adjusted Third Quarter Earnings

MEMPHIS, Tenn., March 16, 2016 ... FedEx Corp. (NYSE: FDX) today reported adjusted earnings of $2.51 per diluted share for the third quarter ended February 29, compared to adjusted earnings of $2.03 per diluted share a year ago. Without adjustments, FedEx reported earnings of $1.84 for the third quarter compared to $2.18 per diluted share last year.

This year’s quarterly consolidated earnings have been adjusted for expenses related to certain legal matters ($0.61 per diluted share) and the pending acquisition of TNT Express ($0.06 per diluted share).

“Our strong financial performance was driven by increasing demand for our broad portfolio of FedEx business solutions which helped increase revenue and adjusted profit for the corporation,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “We sincerely appreciate the peak season efforts of our FedEx team members who delivered great service despite the challenges of stronger-than-expected shipping demand, driven by the growth in e-commerce.”

Third Quarter Results

FedEx Corp. reported the following consolidated results for the third quarter:

Third Quarter Results

Fiscal 2016 Fiscal 2015
Adjusted (non-GAAP) As Reported
As Reported
Revenue $12.7 billion $12.7 billion $11.7 billion $11.7 billion
Operating income $1.16 billion $864 million $971 million $1.04 billion
Operating margin 9.2% 6.8% 8.3% 8.9%
Net Income $692 million $507 million $586 million $628 million
Diluted EPS $2.51 $1.84 $2.03 $2.18

Adjusted operating income rose 19% year over year primarily due to improved yield management and the continued positive impacts from profit improvement program initiatives at FedEx Express. The net impact of fuel and currency exchange rates also improved results. These benefits were partially offset by weaker operating results at FedEx Freight and FedEx Ground.

During the quarter, the company acquired 7.3 million shares of FedEx common stock. Share repurchases benefited the quarter’s results by $0.07 per diluted share year over year.


FedEx is tightening its adjusted earnings forecast to $10.70 to $10.90 per diluted share for fiscal 2016 before year-end mark-to-market pension accounting adjustments (“MTM adjustments”), compared to the previous forecast of $10.40 to $10.90 per diluted share. The outlook assumes moderate economic growth and excludes certain legal matters as well as any TNT-related costs or operating results. The capital spending forecast for the fiscal year is now $4.8 billion.

“We now expect our fiscal 2016 adjusted earnings to be up 20% to 22% over last year, as we continue to benefit from our execution of the profit improvement program,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “Our positive financial momentum should continue into our upcoming fiscal 2017, where we expect solid growth in earnings and cash flow.”

FedEx Express Segment

For the third quarter, the FedEx Express segment reported:

  • Revenue of $6.56 billion, down 1% from last year’s $6.66 billion
  • Operating income of $595 million, up 51% from $393 million a year ago
  • Operating margin of 9.1%, up from 5.9% the previous year

Revenue decreased slightly as lower fuel surcharges and unfavorable currency exchange rates offset improved yield management and a 2% increase in U.S. domestic volume.

Operating results improved due to yield management efforts and U.S. domestic volume growth as well as the ongoing benefits from profit improvement program initiatives, which continued to improve revenue quality and constrain expense growth. Fuel and currency exchange rate changes had a positive net impact on the quarter.

FedEx Ground Segment

For the third quarter, the FedEx Ground segment reported:

  • Revenue of $4.41 billion, up 30% from last year’s $3.39 billion
  • Operating income of $557 million, down from $559 million a year ago
  • Operating margin of 12.6%, down from 16.5% the previous year

Revenue increased due to an 11% increase in FedEx Ground volume, improved yield management, the recording of FedEx SmartPost revenues on a gross basis versus the previous net treatment and the inclusion of GENCO results for the entire quarter versus one month in the prior year’s results.

Operating results were negatively impacted by higher costs, driven significantly by network expansion and by peak season demand that exceeded both volume and package size expectations. Increased self-insurance expense and higher purchased transportation rates also negatively impacted the quarter. The change in FedEx SmartPost revenue reporting and the inclusion of GENCO results collectively reduced the operating margin year-over-year by 1.9 percentage points.

FedEx Ground has reached agreements in principle to settle all of the 19 cases on appeal in the multidistrict independent contractor litigation. The multidistrict court had found the owner-operators in these cases to be contractors as a matter of law, and the disputes involve a contractor model which FedEx Ground has not operated since 2011. In the third quarter, we recognized a liability at Corporate for the net expected loss of $204 million for these settlements and other contractor-related proceedings. The settlements will require court approval.

FedEx Freight Segment

For the third quarter, the FedEx Freight segment reported:

  • Revenue of $1.45 billion, up 1% from last year’s $1.43 billion
  • Operating income of $56 million, down 16% from $67 million a year ago
  • Operating margin of 3.9%, down from 4.7% the previous year

Revenue increased as less-than-truckload (LTL) average daily shipments increased 7%, mostly offset by lower fuel surcharges and weight per shipment.

Operating results declined primarily due to salaries and employee benefits expense outpacing volume growth.

Corporate Overview

FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $49 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 340,000 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

Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and third quarter fiscal 2016 Statistical Book. These materials, as well as a webcast of the earnings release conference call to be held at 5:00 p.m. EDT on March 16 are available on the company’s website at A replay of the conference call webcast will be posted on our website following the call.

The Investor Relations page of our website,, contains a significant amount of information about FedEx, including our SEC filings and financial and other information for investors. The information that we post on our Investor Relations website could be deemed to be material information. We encourage investors, the media and others interested in the company to visit this website from time to time, as information is updated and new information is posted.

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, our ability to execute on our profit improvement programs, 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. Any forward-looking statement speaks only as of the date on which it is made. We do not undertake or assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.


The company believes that meaningful analysis of our financial performance requires an understanding of the factors underlying that performance, including an understanding of items that are non-operational or non-recurring in nature. Excluding from third quarter fiscal 2016 results TNT Express-related expenses and certain legal settlement costs (net of recognized insurance recoveries), and from third quarter fiscal 2015 results the credit associated with the segment reporting change, will assist investors in understanding and allow for more accurate comparisons of the company’s core operating performance. As required by SEC rules, the table below presents a reconciliation of our presented non-GAAP measures to the most directly comparable GAAP measures. The inability to predict the amount of any future year-end mark-to-market pension accounting adjustments and the amount and timing of any operating results and integration planning and acquisition-related costs with respect to TNT Express makes a reconciliation of the forecasts for adjusted earnings per diluted share for the full year impracticable.

Third Quarter Fiscal 2016

Dollars in millions; except EPS

Operating Income Operating Margin1 Net Income1 Diluted Earnings Per Share
Non-GAAP measure $1,160 9.2% $692 $11.7 billion
FedEx Ground legal matters2 $1.16 billion $864 million $971 million $1.04 billion
FedEx Trade Networks legal matter2 9.2% 6.8% 8.3% 8.9%
TNT Express expenses $692 million $507 million $586 million $628 million
GAAP measure $2.51 $1.84 $2.03 $2.18

Third Quarter Fiscal 2015

Dollars in millions; except EPS

Operating Income Operating Margin Net Income Diluted Earnings Per Share
Non-GAAP measure $971 8.3% $586 $2.03
Segment reporting change3 67 0.6% 42 0.15
GAAP measure $1,038 $8.9% $628 $2.18


1 – Does not sum to total due to rounding.

2 – Net of recognized insurance recovery.

3 – Represents the credit at Corporate resulting from the change in recognizing expected return on plan assets for our defined benefit pension and post-retirement healthcare plans at the segment level associated with the adoption of mark-to-market accounting, as discussed further in our fiscal 2015 Annual Report on Form 10-K.