FedEx Corp. Reports First Quarter Results
FedEx Express Announces 2013 Rate Increase
"As we announced on September 4, weakness in the global economy constrained revenue growth at FedEx Express during our first quarter and affected our earnings," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "Meanwhile, our FedEx Ground and FedEx Freight segments performed well, with both improving their year-over-year operating margins. We are taking further actions to reduce costs and adjust our networks to match current and anticipated shipment volumes."
First Quarter Results
FedEx Corp. reported the following consolidated results for the first quarter:
• Revenue of $10.79 billion, up 3% from $10.52 billion the previous year
• Operating income of $742 million, up 1% from $737 million last year
• Operating margin of 6.9%, down from 7.0% the previous year
• Net income of $459 million, down 1% from last year's $464 million
During the quarter, improved FedEx Freight results and the continued strong performance at FedEx Ground were more than offset by lower demand for priority services at FedEx Express.
FedEx projects earnings to be $1.30 to $1.45 per diluted share in the second quarter and $6.20 to $6.60 per diluted share for fiscal 2013, compared to the company's previous full year forecast of $6.90 to $7.40 per diluted share. This guidance assumes the current market outlook for fuel prices and does not include the impact of the cost reduction programs currently under review. The company reported earnings of $1.57 per diluted share in last year's second quarter. The capital spending forecast for fiscal 2013 remains $3.9 billion.
"Earnings for the first quarter were below our expectations as weak global economic conditions dampened revenue growth, drove a shift by our customers to our deferred services and outpaced our near-term ability to reduce FedEx Express operating costs to match demand levels," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "We plan to provide additional information on our forecast and long-term opportunities at our Investors and Lenders Meeting on October 9-10 in Memphis."
2013 Rate Increases
FedEx Express will increase shipping rates by a net average of 3.9% for U.S. domestic, U.S. export and U.S. import services effective January 7, 2013. The full average rate increase of 5.9% will be partially offset by adjusting the fuel price threshold at which the fuel surcharge begins, reducing the fuel surcharge by two percentage points. The FedEx Ground and FedEx SmartPost pricing changes for 2013 will be announced later this year. FedEx Freight implemented a 6.9% general rate increase on July 9, 2012.
Details of changes that will be made to FedEx Express surcharges can be found at fedex.com/us/2013rates.
FedEx Express Segment
For the first quarter, the FedEx Express segment reported:
• Revenue of $6.63 billion, up 1% from last year's $6.59 billion
• Operating income of $207 million, down 28% from $288 million a year ago
• Operating margin of 3.1%, down from 4.4% the previous year
Revenue growth during the quarter was constrained by global economic conditions. U.S. domestic revenue per package grew 2% as higher rate per pound was partially offset by lower fuel surcharges. U.S. domestic average daily package volume declined 5%. FedEx international export average daily package volume grew 1% driven by increases in FedEx international economy from Europe and Asia. International export revenue per package fell 4% due to the unfavorable impact of exchange rate changes and lower fuel surcharges. FedEx international priority freight pounds increased 2%, while revenue per pound decreased 4% due to the unfavorable impact of exchange rate changes and lower fuel surcharges.
Operating income and margin were lower as declining U.S. domestic package volumes, the demand shift toward lower-yielding international services and increased depreciation and employee benefits expenses more than offset cost-containment activities, such as reductions in flight hours and labor hours. Recent business acquisitions, exchange rate changes and fuel affected both revenue and expense, but had little net effect on profit for the quarter.
FedEx Ground Segment
For the first quarter, the FedEx Ground segment reported:
• Revenue of $2.46 billion, up 8% from last year's $2.28 billion
• Operating income of $445 million, up 9% from $407 million a year ago
• Operating margin of 18.1%, up from 17.9% the previous year
FedEx Ground average daily package volume grew 5% in the first quarter driven by increases in both business-to-business and FedEx Home Delivery services. Revenue per package increased 2% primarily due to increased rates. FedEx SmartPost average daily volume increased 18% primarily due to growth in e-commerce. FedEx SmartPost net revenue per package decreased 1% primarily due to higher postage rates.
Operating income increased due to higher FedEx Ground revenue per package and increased volume.
FedEx Freight Segment
For the first quarter, the FedEx Freight segment reported:
• Revenue of $1.40 billion, up 5% from last year's $1.33 billion
• Operating income of $90 million, up 114% from $42 million a year ago
• Operating margin of 6.4%, up from 3.2% the previous year
Less-than-truckload (LTL) average daily shipments increased 4% due to an increase in customer demand for the FedEx Freight Economy service offering in all lengths of haul. LTL yield increased 2% due to improvements in FedEx Freight Economy yields.
Operating income and margin increased primarily due to profitable volume growth, higher yield and continued improvements in operational efficiencies.
FedEx Corp. (NYS: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $43 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 300,000 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 first quarter fiscal 2013 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 September 18 are available on the company's website at investors.fedex.com. A replay of the conference call webcast will be posted on our website 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.
The financial section of this release is provided on the company's website at investors.fedex.com.
Jess Bunn, 901-818-7463
Mickey Foster, 901-818-7468
Home Page: fedex.com
KEYWORDS: United States North America Tennessee
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