FedEx Corp. Reports Higher Year-Over-Year First Quarter Results
FedEx Express Announces 2014 Rate Increase
"Growth in overall demand for our broad global portfolio of solutions drove our improved first quarter results," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "FedEx Express remains focused on reducing costs while facing challenging global economic conditions. Meanwhile, FedEx Ground continues to generate strong profitability on growing customer demand for its services."
First Quarter Results
FedEx Corp. reported the following consolidated results for the first quarter:
• Revenue of $11.0 billion, up 2% from $10.8 billion the previous year
• Operating income of $795 million, up 7% from $742 million last year
• Operating margin of 7.2%, up from 6.9% the previous year
• Net income of $489 million, up 7% from last year's $459 million
Revenue and earnings increased during the quarter, driven by solid performance at each of the company's transportation segments. Results include significant headwinds from the net year-over-year impact from the timing lag that exists between when fuel prices change and indexed fuel surcharges automatically adjust, as well as one fewer operating day.
FedEx reaffirmed its forecast of full-year earnings per share growth of 7% to 13% from last year's adjusted results. This outlook assumes the market outlook for fuel prices, U.S. GDP growth of 2.1% and world GDP growth of 2.6%. The capital spending forecast for fiscal 2014 remains $4 billion.
"We remain confident in our full year earnings outlook despite tepid global economic growth," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "FedEx Express continued to execute on its profit improvement initiatives during our first quarter. We remain focused and are committed to FedEx Express achieving its $1.6 billion operating profit improvement target by the end of fiscal 2016."
2014 Rate Increases
FedEx Express will increase shipping rates by an average of 3.9% for U.S. domestic, U.S. export and U.S. import services effective January 6, 2014. The FedEx Ground and FedEx SmartPost pricing changes for 2014 will be announced later this year. FedEx Freight implemented a 4.5% general rate increase on July 1, 2013.
Details of changes that will be made to FedEx Express surcharges can be found at fedex.com/us/2014rates.
FedEx Express Segment
For the first quarter, the FedEx Express segment reported:
• Revenue of $6.61 billion, down slightly from last year's $6.63 billion
• Operating income of $236 million, up 14% from $207 million a year ago
• Operating margin of 3.6%, up from 3.1% the previous year
Revenue decreased due to lower fuel surcharge revenue and one fewer operating day. U.S. domestic average daily package volume increased 1% while U.S. domestic revenue per package was essentially flat, as higher rate per pound and weight per package were offset by lower fuel surcharges. FedEx international export average daily volume grew 4% during the quarter, as FedEx International Economy grew 15% while FedEx International Priority slightly declined. International export revenue per package fell 4% primarily due to lower fuel surcharges, lower rates and the demand shift to lower-yielding international services.
Operating income and margin growth were constrained by the significant net negative impact of the fuel surcharge timing lag and one fewer operating day. Despite these constraints, operating results improved due to better base U.S. business performance and lower pension expenses. The continued modernization of the company's aircraft fleet drove maintenance costs lower, partially offset by higher related depreciation expense.
FedEx Ground Segment
For the first quarter, the FedEx Ground segment reported:
• Revenue of $2.73 billion, up 11% from last year's $2.46 billion
• Operating income of $468 million, up 5% from $445 million a year ago
• Operating margin of 17.1%, down from 18.1% the previous year
FedEx Ground average daily volume grew 11% in the first quarter due to continued growth in both FedEx Home Delivery and commercial business services. Revenue per package increased 1% due to increased rates and higher residential surcharge revenue, partially offset by lower fuel surcharges. FedEx SmartPost average daily volume increased 26% primarily due to growth in e-commerce. FedEx SmartPost net revenue per package decreased 5% due to increased postage rates and lower fuel surcharges, partially offset by rate increases.
Operating income increased due to higher volume and revenue per package, partially offset by the net negative impact of fuel, increased network expansion costs and one fewer operating day. Operating margin decreased due to the net negative impact of fuel.
FedEx Freight Segment
For the first quarter, the FedEx Freight segment reported:
• Revenue of $1.42 billion, up 2% from last year's $1.40 billion
• Operating income of $91 million, up 1% from $90 million a year ago
• Operating margin of 6.4%, unchanged from 6.4% the previous year
Less-than-truckload (LTL) yield increased 1% due to FedEx Freight Economy and FedEx Freight Priority base yield improvement. LTL weight per shipment grew 1% due to heavier FedEx Freight Priority, while LTL average daily shipments increased 1% due to FedEx Freight Economy.
Operating income improved due to higher weight per shipment, yield and average daily shipments, overcoming the impact of one fewer operating day.
FedEx Corp. (NYS: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $45 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 2014 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, our ability to execute on our business realignment program, 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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