Cyber attack, Hurricane Harvey weigh on FedEx Q1 FY18 earnings

The Memphis, Tenn.-based integrator posted a net income of $596 million for the first quarter of its fiscal year 2018, a 16 percent decrease compared to the same period a year prior, citing substantial losses from the June NotPetya attack on TNT Express.    The NotPetya cyber attack earlier this year, along with the Hurricane Harvey, which pummeled the U.S. Gulf Coast with heavy rains, shutting down supply chain operations for several days, negatively impacted FedEx earnings, according to the company’s first quarter fiscal year 2018 earnings report.
   The parcel carrier and integrated logistics company posted a net income of $596 million during the quarter ended Aug. 31, 2017, a 16 percent decrease compared to a net income of $715 million during the same period the previous year. Diluted earnings per share (EPS) stood at $2.19 in Q1 FY2018 compared to $2.65 per share in fiscal year 2017.
   The company’s operating income for the quarter slipped 11.1 percent year-over-year to $1.12 billion, despite revenues climbing 4.1 percent to $15.3 billion.
   “Financial results during the quarter benefited from higher base rates at each of our transportation segments, which was more than offset by reduced revenue and increased expenses resulting from the TNT Express cyberattack, TNT Express integration expenses, higher costs at FedEx Ground, a higher tax rate, and the impact from Hurricane Harvey,” FedEx said in a statement. “Results also benefited from lower incentive compensation accruals.”
   TNT Express was significantly affected during the quarter due to the cyber attack, FedEx stated, and volumes, revenues and profits continue to remain below previous levels despite operations resuming normalcy. The impact per diluted share for the TNT Express integration came to $0.30 in fiscal year 2018 compared to $0.17 in fiscal year 2017, FedEx stated.
   “The first quarter posed significant operational challenges due to the TNT Express cyber attack and Hurricane Harvey, and I want to thank our team members for their extraordinary dedication and performance,” Frederick W. Smith, FedEx Corp. chairman and chief executive officer, said of the results. “We are confident of our prospects for long-term profitable growth, and we reaffirm our commitment to improve operating income at the FedEx Express segment by $1.2 billion to $1.5 billion in fiscal 2020 versus fiscal 2017.”
   FedEx is also lowering its full year fiscal 2018 forecast due to the cyber attack impacts on TNT Express. Earnings are now projected to be in the range of $11.05 per diluted share to $11.85 per diluted share, the company stated.
   “The impact of the cyber attack on TNT Express and lower-than-expected results at FedEx Ground reduced our first quarter earnings,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “We are currently executing plans to mitigate the full-year impact of these issues.”
   As previously announced, FedEx will also raise base shipping rates for the 2018 calendar year. Effective Jan. 1, 2018, FedEx Express, FedEx Ground and FedEx Freight will increase shipping rates by 4.9 percent on average.
   Additionally, dimensional weight pricing will apply to FedEx SmartPost shipments and third-party billing surcharges will be in effect starting Jan. 22, 2018, the company said.