Parcel delivery and trucking company FedEx Corp. (NYSE: FDX) this week reported a net profit of $700 million for its fiscal second quarter, missing Wall Street expectations on earnings despite higher revenue.
The 1% year-over-year increase in earnings for the period ending Nov. 30 came as earnings per share increased to $2.59 from $2.44. Total revenue grew 20% to $14.9 billion. The per share performance was short of a consensus estimate from analysts calling for $2.90 per share, but revenue exceeded the forecast.
“FedEx increased revenues and operating income despite continued low growth rates in the global economy," said Fred Smith, FedEx chairman, president and CEO.
The company’s trucking segment, FedEx Freight, reported a 13% decline in operating income while revenue increased 3% to $1.6 billion. It said the increase in revenue was due to growth in less-than-truckload average daily shipments, partially offset by lower weight per shipment. Operating results decreased due to lower average weight per shipment and higher information technology expenses.
FedEx Express revenue and operating income both increased 2% during the quarter, with revenue totaling $6.74 billion and operating income totaling $636 million. The hike in revenue was attributed to increased base rates and higher package volume.
FedEx Ground saw revenue increase 9% to $4.42 billion, while operating income slid 12% to $465 million. Revenue increased due to higher volume and yields. Average daily volume grew 5%, driven by e–commerce and commercial package growth, according to the company. Operating income fell, however, due to higher overhead costs for network expansion and increased purchased transportation rates.
The company’s TNT Express segment, a Netherlands-based company FedEx acquired in May, saw no change in revenue at $1.9 billion, but operating income fell to $70 million from $90 million, due partly to integration and restructuring costs.
Looking ahead, Alan B. Graf, FedEx executive vice president and chief financial officer, said the company is on track to achieve its fiscal 2017 earnings forecast as it continues long-term investments in its networks.
“While these network projects are impacting FedEx Ground’s near-term profitability, the investments will expand capacity, improve service and enhance long-term returns and cash flows,” he said.
Originally posted on Automotive Fleet
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