FedEx today announced strong profits growth for the fourth quarter ended May 31 thanks to a 23%rise in international priority packages and good growth for its US ground package business.
FedEx Corp. reported a 20% rise in revenue to $9.43 billion. It made an operating profit of $696million, up from an operating loss of $849 million last year. This left the operating marginat 7.4%, up from -10.8% the previous year. The company had net profits of $419 million, up fromlast year’s net loss of $876 million.
Earnings increased as a result of stronger shipment growth in international express andcontinued growth at FedEx Ground. An operating loss at FedEx Freight, the reinstatement ofcertain employee compensation programs and higher aircraft maintenance expenses impacted thequarter’s results.
“FedEx delivered strong results in our fourth quarter, thanks to sequential growth in packagevolume and our ability to leverage our unique global networks to take advantage of a recoveringeconomy,” said Fred Smith, FedEx chairman, president and CEO. “We ended our fiscal year astronger company, and I am confident FedEx is very well positioned for future revenue and earningsgrowth.”
For the full 2009/10 year, FedEx reported revenue of $34.7 billion, down 2%. Operatingprofit ended at $2 billion, up from $747 million last year, while net profit rose to $1.18 billion,up from last year’s $98 million. Capital spending for fiscal 2010 was $2.8 billion, with $1.5billion of investments largely related to more fuel-efficient aircraft, including the delivery ofsix Boeing 777Fs for use in the international network and 12 Boeing 757s.
For the fourth quarter, FedEx Express reported a 23% rise in revenue to $5.88 billion. Itsoperating profit rose to $413 million, up from an operating loss of $136 million a year ago. Theoperating margin was 7%, up from -2.8% the previous year.
FedEx International Priority (IP) average daily package volume increased 23%, led by exportsfrom Asia. IP revenue per package grew 6% due to higher weight per package, higher fuelsurcharges and a favourable exchange rate impact. US domestic revenue per package grew 8% due tohigher fuel surcharges and improved weight per package, while average daily package volumeincreased 1%.
Operating profit and margin improvements were driven by volume and revenue growth, particularlyin higher-margin IP package and freight services. Results also include the partialreinstatement of certain employee compensation programs and higher aircraft maintenance expenses,primarily due to increased utilisation. Last year’s fourth quarter operating income and marginwere negatively impacted by one-time costs of $260 million associated with aircraft-related chargesand severance programs.
FedEx Express added a ninth scheduled daily transpacific frequency in April, utilising thecapabilities of Boeing 777F aircraft. This additional frequency provides needed capacity fromAsia to the US, and allows best-in-market cut-off times. Also in April, a third scheduleddaily flight was added from Asia to Europe, providing the first-in-market next-day service fromHong Kong to all of Europe, the company announced.
For the fourth quarter, FedEx Ground, the US package business, reported a 15% revenue increaseto $1.96 billion and operating income of $319 million, up 57%. Its operating margin improved to16.3%, up from 11.9% the previous year.
FedEx Ground average daily package volume grew 7% in the fourth quarter driven by increases inthe business-to-business market and the FedEx Home Delivery service. Yield increased 5%primarily due to higher fuel surcharges. FedEx SmartPost average daily volume increased 23%,with yield increasing 6%. Operating income and margin increased due to higher package yield andvolume, as well as lower self-insurance expenses and improved productivity.
For the fourth quarter, FedEx Freight reported revenue of $1.23 billion, up 30%, and anoperating loss of $36 million, compared with an operating loss of $106 million a year ago.Less-than-truckload (LTL) average daily shipments increased 34% and LTL yield declined 6% year overyear due to the effects of discounted pricing. Operating losses in the quarter were driven by loweryields and higher volume-related costs, as significantly higher shipment levels required increasedpurchased transportation and other expenses.
FedEx Services revenue for the fourth quarter, which included the operations of FedEx Office,was down 6% year over year, due to the September 1, 2009 realignment of FedEx Supply Chain Systemsto the FedEx Express reporting segment and declines in copy product revenues.
Looking ahead, FedEx said it forecasts earnings to be $0.85 to $1.05 per diluted share in thefirst quarter and $4.40 to $5.00 per diluted share for fiscal year 2011. This guidance assumesthe current market outlook for fuel prices and a continued moderate recovery in the globaleconomy. The company reported earnings of $0.58 per diluted share in last year’s firstquarter.
“We expect continued improvement in both revenue and earnings in fiscal 2011,” said Alan B.Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “Resumed growth inindustrial production and global trade is increasing demand for our transportation services, andyield management remains a top priority across all of our operating companies. However, weexpect the growth in earnings in fiscal 2011 to be constrained by significant increases in fixedpension and volume-related aircraft maintenance expenses, along with higher anticipated healthcarecosts. In addition, our earnings guidance includes increased costs related to the plannedreinstatement of various employee compensation programs.”
The capital spending forecast for fiscal 2011 is $3.2 billion, which includes the expecteddelivery of six Boeing 777Fs and 16 Boeing 757s, along with investments in information technology,vehicles and facilities in support of the company’s global growth strategy. “We remain fullyfocused on improving yields, margins, returns and cash flow. Our cash flow from operationswas sufficient to fund our fiscal 2010 capital investments and we expect this to be the case againin fiscal 2011,” said Graf.
