FedEx Express revenue dipped 0.3% to $6.6bn due to lower
fuel surcharges and one less operating day during the quarter. However, as a
result of mostly cost cutting measures, operating income jumped 14% to $236m. A
shift towards the lower cost service, International Economy, continued as
revenue increased 9% and volumes increased 15%.
Meanwhile, International Priority noted no change in volumes but a 5%
decline in revenue for the quarter. Because of the shift towards International
Economy, FedEx has made adjustments in its cost structure and network and is
actively promoting this service. In regards to its freight forwarding group,
FedEx Trade Networks, volumes were higher while yields were a bit weaker. This
group has proven successful in moving lower-yielding international economy
within its network (mostly via ocean) thus allowing FedEx Express to focus on
higher-yielding commodities.
As the Express group continues to undergo realignments, it
announced it would increase rates by an average of 3.9% for US domestic, export
and import effective January 6, 2014. It is is also evaluating further cost
reduction actions to ensure that it achieves its $1.6bn profit improvement goal
by end of fiscal year 2016.
FedEx Ground had a strong quarter with revenue increasing
11.0% to $273bn. Operating income increased 5% to $468m. Average daily volume
grew 11% and was attributed to FedEx Home Delivery and commercial business
services. FedEx SmartPost also noted strong average daily volume, up 26% but
net revenue per package declined 5.0% because of increases in postage rates and
lower fuel surcharges. Ecommerce remained the primary driver of volume
increases.
Finally, FedEx Freight reported revenue increased 2.0% for
the quarter to $1.4bn. Operating income increased 1.0% to 91m. Higher weight
per shipment, LTL yields, and average daily LTL shipments improved income at
Freight. FedEx Freight continued to optimize the line haul network by increased
utilization of rail over the quarter. Now it’s 17% of total line haul miles.
Overall, fiscal year 2014 has started positive for
FedEx. The company should continue to
see improvements as it begins to benefit from its network adjustments and
improving conditions in China and Europe.
FedEx reaffirmed its fiscal year 2014 earnings per share
growth of 7% to 13% from the fiscal year 2013 adjusted results. "We remain
confident in our full year earnings outlook despite tepid global economic
growth," said Alan B. Graf, Jr., executive vice president and chief
financial officer for FedEx.
