External factors continue to affect FedEx earnings. For the
quarter ending November 30, overall revenue increased 5% to $11.1bn while
operating income declined 8% to $718m. The decline in operating income was a
result of Superstorm Sandy, negative economic conditions and customers shifting
to economy services.
The largest division, FedEx Express, reported revenue up 4%
to $6.86bn but operating income down 33% to $230m. Revenue increases were
attributed to FedEx Trade Networks and recent acquisitions. Operating income
decline was due to lower-yielding international services, Superstorm Sandy and
higher pension costs. FedEx international export average daily package volume
grew 6% driven by increases in FedEx International Economy from Europe and Asia
and by increases in FedEx International Priority from Asia. FedEx noted airfreight out of Asia Pacific is
doing “quite well” with a lot of it from high-tech customers.
In December, FedEx Express entered into an agreement with
Boeing to purchase 4 incremental 767 freighters to be delivered in 2015. As
part of that agreement, Express is also deferring the delivery of 2 firm 777
freighter orders for 1 year, from 2015 to 2016.
FedEx Ground revenue increased 11% to $2.59bn with operating
income up 4% to $412m. Average daily volume increased 8% with FedEx Home
Delivery and business-to-business services being credited with this increase.
This volume increase seems to indicate market share gain. FedEx SmartPost also continued to report
strong average daily volume, 17% increase thanks to the popularity of
ecommerce. When asked about possible market share gains at the expense of UPS’
upcoming negotiations with Teamsters, FedEx said that it had “picked up a
number of significant customers that have, obviously, stated concerns over the UPS
situation”. The company did note however, that this was not the primary reason
for the healthy increase in volume.
FedEx Freight benefited with a 4% increase in revenue to
$1.38bn and operating income increasing 90% to $76m. Average daily shipments
increased 2%.
The holiday season appears to be a positive one for FedEx.
December 17th, 19.8m shipments were moved worldwide. In fact, FedEx
moved more than 19m shipments on December 10 and November 26 which was Cyber
Monday. For Cyber Monday alone, FedEx Ground moved 8.7m packages while
SmartPost moved 6.1m packages.
Finally, outlook for the company is uncertain as it
continues its restructuring process. “We are steadfastly committed to the
$1.7bn of annual profit improvement actions, primarily at FedEx Express, which
we announced in October,” said Alan B. Graf, Jr., FedEx Corp. executive vice
president and chief financial officer. “We expect to begin to see the benefits
of these actions in fiscal 2014, with a significant portion of the profit improvement
achieved by the end of fiscal 2015. Meanwhile, the mounting uncertainty in the
U.S. related to fiscal policies and their potential to impact earnings by
further restraining economic growth is a concern.”
