FedEx posts strong fiscal second quarter results

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Fiscal second quarter earnings for transportation and logistics bellwether FedEx showed strong annual gains.

Net income for the quarter at $775 million was up 9.7%, and earnings per share at $2.84 were up 8% annually. Quarterly operating income of $1.26 billion was up around 7%.

“Strategic execution by the FedEx team and a stronger global economy drove improved financial results, and we believe we are well positioned for profitable long-term growth,” said Fred Smith, FedEx chairman and CEO on the company’s earnings call yesterday. “FedEx is on track for another record holiday shipping season and we’re pleased to say the outstanding service around the world and across our portfolio during the second quarter has continued into December. We plan year round to meet the intense challenges of the peak season as average daily volumes can more than double with heavy demand for residential e-commerce deliveries.”

Individual unit quarterly performances:

FedEx Express revenue, which includes TNT Express, was up 7.6% at $9.35 billion, and operating income rose 1.6% to $717 million. FedEx said revenue growth was paced by higher base rates, strong growth in international services, and favorable exchange rates that were partially offset by the TNT Express cyberattack earlier this year. 

Total quarterly package revenue was up 7% at $7.009 billion, with U.S. package revenue up 6% at $3.141 billion and total international export package revenue up 7% at $2.654 billion.

Total average daily packages at 6.384 million were up 3%, with total daily U.S. domestic packages up 1% at 2.733 million and revenue per package up 4% at $17.43. Total daily international export packages at 821,000 were up 3%, with international domestic up 5% at 2.830 million.

FedEx Ground revenue headed up 12% to $4.93 billion, and operating income also rose 12% to $521 million. FedEx noted that revenue rose due to average daily package volume increasing by 7%, coupled with higher base rates.

FedEx Freight, the company’s less-than-truckload segment saw a 10% gain in revenue to $1.176 billion, with operating income climbing 34% to $118 billion. LTL revenue per shipment was up 7%, with average daily LTL shipment growth coming in at 4%.

Smith said on the call that looking ahead FedEx expects yield and volume growth at all of its transportation segments will support revenue and earnings growth in the second half of fiscal 2018. He explained that the company’s plans remain on target to improve operating income at the FedEx Express segment by $1.2 billion to $1.5 billion in fiscal 2020 versus fiscal 2017, and its our goal to increase earnings, margins, cash flows and returns remains fully intact.

Jerry Hempstead, president of Hempstead Consulting, said that FedEx posted an extremely strong financial quarter, as well as its biggest quarter ever for FedEx Ground. 

“The bad news for shippers is that the results reflect we are all paying more to ship packages,” he said. “As an example Overnight package count went down but the yield per package went up. With all the new rule changes, tariff base increases, and accessorial increases shippers need to budget accordingly for 2018.”

On another note, he said that the new tax reform law is great news for FedEx, as well as its chief competitor FedEx, “is going to drive profits not only for them, but I suspect is going to heat up the economy and generate more packages. When the economy is down, the first thing to go is premium services, and the first thing to come back when things get better is the priority business.”

About the Author

Jeff Berman, Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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