FedEx posts strong first quarter results

The Memphis, Tenn.-based integrator posted net income of $692 million on $12.3 billion in revenues of for the first quarter of fiscal year 2016, year-over-year increases of 6 percent and 5 percent, respectively.    FedEx Corp. posted net income of $692 million for the first quarter of fiscal year 2016, which ended Aug. 31, an increase of 6 percent from the first quarter of fiscal 2015, according to the company’s most recent financial statements.
   FedEx reported earnings of $2.42 per diluted share for the quarter in comparison to $2.26 per diluted share for the same quarter last year, missing the street consensus projection of $2.46 per share by $0.04. In a conference call with analysts, however, CEO Frederick Smith was quick to point out that the the guidance “miss” was based on of analysts’ expectations and not internal guidance from FedEx.
   Revenues for the quarter reached $12.3 billion, a year-over-year increase of 5 percent and in line with the consensus projection.
   FedEx had an operating income of $1.14 billion for the quarter, an 8 percent increase from the first quarter of fiscal 2015.
   In addition, the company’s operating margin rose from 9.1 percent from last year’s first quarter of fiscal 2015 to 9.3 percent for the quarter.
   FedEx attributed the increase in operating results from the first quarter of fiscal 2015 to various factors including FedEx Express’ sharp increase in operating income, which grew 45 percent year-over-year to $545 million; the additional operating day at each of the company’s transportation segments; and the continuous positive impacts from the company’s profit improvement program.
   However, FedEx’s strong operating results were partially offset by higher incentive compensation accruals, FedEx Freight’s lower than expected volumes and FedEx Ground’s higher self-insurance reserves and higher than expected operating costs.
   Costs related to the pending acquisition of TNT Express were ‘immaterial’ during the first quarter of fiscal 2016, FedEx said. FedEx formalized its offer to purchase the Netherlands-based parcel courier for $4.8 billion in August.
   Broken down into individual segments, FedEx Express posted a year-over-year drop in revenues by 4 percent to $6.59 billion for the first quarter of fiscal 2016. The company attributed the decline to a unfavorable currency exchange rates and a drop in fuel surcharges, which more than offset improvements in base rates.
   FedEx Ground’s revenues stood at $3.83 billion, a year-over-year increase of 29 percent. The company attributed the increase to the inclusion of GENCO results, a third-party logistics provider FedEx paid $1.4 billion to acquire in January; the recording of FedEx SmartPost service revenues on a gross basis versus the previous net treatment; and an increase in ground revenue per package and volumes.
   FedEx Freight’s revenues, which stood at $1.6 billion, remained flat in comparison to last year.
   “FedEx Corp. is performing solidly given weaker-than-expected economic conditions, especially in manufacturing and global trade,” Smith said in a statement. “Our profit improvement program is on track and delivering impressive results, and I am very confident FedEx is well positioned to deliver value for shareowners, customers and team members in fiscal 2016 and beyond.”
   FedEx projects adjusted earnings for fiscal 2016 will be between $10.40 per diluted share and $10.90 per diluted share prior to year-end mark-to-market pension accounting adjustments, aided by benefits from the profit improvement program. The company’s outlook assumes moderate economic growth and excludes any operating results or costs related to TNT Express.
   “Our new fiscal 2016 outlook is modestly lower than our initial forecast due primarily to weaker LTL industry demand and higher than expected self-insurance reserves and operating costs at FedEx Ground,” said Chief Financial Officer Alan Graf Jr. “We still expect strong earnings growth this year, as we remain focused on executing our profit improvement program, leveraging e-commerce growth and enhancing our revenue quality.”