FDX FedEx Corp

Strong Earnings Growth Expected in Fiscal 2015

FedEx Corp. (NYSE: FDX) today reported earnings of $2.46 per diluted share for the fourth quarter ended May 31. Last year’s fourth quarter earnings were $2.13 per diluted share, excluding a $0.98 per diluted share business realignment program charge and a $0.20 per diluted share noncash aircraft impairment charge at FedEx Express. Including last year’s charges, earnings were $0.95 per diluted share.

“An outstanding fourth quarter helped FedEx post solid results for fiscal 2014, and we believe we are well positioned for a strong fiscal 2015,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “I would like to extend my sincere appreciation to the entire FedEx team for their contribution to our results and their continued commitment to providing outstanding service to our customers and connecting people and possibilities around the world.”

Fourth Quarter Results

FedEx Corp. reported the following consolidated results for the fourth quarter:

         

Fiscal 2014

Fiscal 2013

Adjusted(non-GAAP)

   

As Reported(GAAP)

Revenue $11.8 billion $11.4 billion $11.4 billion Operating Income $1.18 billion $1.10 billion $502 million Operating Margin 10.0 % 9.6 % 4.4 % Net Income $730 million $679 million $303 million Diluted EPS $ 2.46 $ 2.13 $ 0.95  

Excluding business realignment program costs and aircraft impairment charges last year, operating results improved on higher volumes and operational efficiencies at FedEx Freight, increased volumes and yields at FedEx Ground, and better revenue and cost performance at FedEx Express.

During the fourth quarter, the company acquired 9.9 million shares of FedEx common stock, increasing the fiscal 2014 purchase total to 36.8 million shares. As of May 31, 2014, 5.3 million shares remained under the existing share repurchase authorizations. Share repurchases benefited fourth quarter earnings by $0.12 per diluted share.

Full Year Results

FedEx Corp. reported the following consolidated results for the full year:

         

Fiscal 2014

Fiscal 2013

Adjusted(non-GAAP)

   

As Reported(GAAP)

Revenue $45.6 billion $44.3 billion $44.3 billion Operating Income $3.45 billion $3.21 billion $2.55 billion Operating Margin 7.6 % 7.3 % 5.8 % Net Income $2.10 billion $1.98 billion $1.56 billion Diluted EPS $ 6.75 $ 6.23 $ 4.91  

Capital spending for fiscal 2014 was $3.5 billion.

Outlook

For fiscal 2015, FedEx projects earnings to be $8.50 to $9.00 per diluted share. The outlook assumes no net year-over-year fuel impact and continued moderate economic growth. Capital spending for fiscal 2015 is expected to increase to approximately $4.2 billion, which includes planned aircraft deliveries to support the company’s fleet modernization program and continued expansion of the FedEx Ground network.

“Fiscal 2014 was a good year for FedEx and we expect fiscal 2015 to be even better,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “With continued modest economic improvement, our results in fiscal 2015 should benefit from base performance improvement and ongoing execution of our profit improvement initiatives at FedEx Express, continued profitable growth at FedEx Ground and FedEx Freight, and our share repurchase program. We remain committed to improving earnings, cash flows, returns on invested capital and returns to shareowners, with the most recent example of the latter being our announced 33% increase in the quarterly dividend.”

FedEx Express Segment

For the fourth quarter, the FedEx Express segment reported:

• Revenue of $7.00 billion, up slightly from last year’s $6.98 billion

• Operating income of $475 million, up 3% from an adjusted $460 million a year ago. Including charges, last year’s operating income was $0.

• Operating margin of 6.8%, up from an adjusted 6.6% the previous year. Including charges, last year’s operating margin was 0.0%.

Revenue increased due to 2% higher package volume and higher base package yields, partially offset by the effects of one fewer operating day, lower fuel surcharges and lower express freight revenues. U.S. domestic average daily volume increased 3%, while U.S. domestic revenue per package was flat as lower fuel surcharges offset higher weight per package and favorable service mix. International export revenue per package grew 2%, as improved rates, higher weight per package and favorable service mix more than offset lower fuel surcharges. International export volume grew 2%, as FedEx International Economy grew 5% while FedEx International Priority® was flat despite reduced lower-yielding distribution services volume.

Operating results increased as higher base package yields and volume, along with lower pension expense, more than offset the significant negative net impact of fuel, lower freight revenue and one fewer operating day.

On May 1, 2014, Express completed the acquisition of Supaswift businesses in South Africa and six other countries: Botswana, Malawi, Mozambique, Namibia, Swaziland and Zambia. The acquisition of Supaswift will increase FedEx’s capabilities in one of the world’s most rapidly developing regions and offer tremendous opportunities for both local and international customers to access new markets.

FedEx Ground Segment

For the fourth quarter, the FedEx Ground segment reported:

• Revenue of $3.01 billion, up 8% from last year’s $2.78 billion

• Operating income of $586 million, up 5% from an adjusted $557 million a year ago. Including charges, last year’s operating income was $464 million.

• Operating margin of 19.5%, down from an adjusted 20.1% the previous year. Including charges, last year’s operating margin was 16.7%.

FedEx Ground average daily volume grew 8% in the fourth quarter, primarily driven by growth in e-commerce. Revenue per package increased 2% due to rate increases and higher residential surcharges, partially offset by lower fuel surcharges. FedEx SmartPost average daily volume decreased 8% while net revenue per package was up 8% due to rate increases and improved customer mix, partially offset by higher postage costs.

Operating results benefited from higher Ground volume and revenue per package, partially offset by higher network expansion costs and one fewer operating day.

FedEx Freight Segment

For the fourth quarter, the FedEx Freight segment reported:

• Revenue of $1.55 billion, up 12% from last year’s $1.39 billion

• Operating income of $122 million, up 51% from an adjusted $81 million a year ago. Including charges, last year’s operating income was $38 million.

• Operating margin of 7.9%, up from an adjusted 5.8% the previous year. Including charges, last year’s operating margin was 2.7%.

Less-than-truckload (LTL) average daily shipments grew 12%, including a 14% increase in demand for Priority service. Weight per shipment grew 2%, driving a 1% increase in revenue per shipment.

Operating results improved due to the positive impacts of higher average daily shipments, higher weight per shipment and improved operational efficiencies, partially offset by one fewer operating day.

Effective June 2, 2014, FedEx Freight increased its published fuel surcharge indices by three percentage points.

Corporate Overview

FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $46 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 300,000 team members to remain "absolutely, positively" focused on safety, the highest ethical and professional standards and the needs of their customers and communities. For more information, visit news.fedex.com.

Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs and fourth quarter fiscal 2014 Statistical Book. These materials, as well as a webcast of the earnings release conference call to be held at 8:30 a.m. EDT on June 18 are available on the company’s website at investors.fedex.com. A replay of the conference call webcast will be posted on our Web site following the call.

Certain statements in this press release may be considered forward-looking statements, such as statements relating to management's views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, our ability to execute on our profit improvement program at FedEx Express, legal challenges or changes related to FedEx Ground’s owner-operators, new U.S. domestic or international government regulation, the impact from any terrorist activities or international conflicts, our ability to effectively operate, integrate and leverage acquired businesses, changes in fuel prices and currency exchange rates, our ability to match capacity to shifting volume levels and other factors which can be found in FedEx Corp.'s and its subsidiaries' press releases and filings with the SEC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURESTO GAAP FINANCIAL MEASURES

The company believes that meaningful analysis of our financial performance requires an understanding of the factors underlying that performance and our judgments about the likelihood that particular factors will repeat. Excluding charges associated with the business realignment program and a noncash aircraft impairment charge at FedEx Express from prior period results will allow for more accurate comparisons of the company’s operating performance. Where applicable, the impacts of these events are shown net of incentive compensation impacts. As required by SEC rules, the tables below present a reconciliation of our presented non-GAAP measures to the most directly comparable GAAP measures.

     

Fourth Quarter Fiscal 2013

 

 

FedEx Corporation

       

Diluted

Operating

Net

Earnings

Dollars in millions, except EPS

Income

   

Margin

Income

Per Share

Non-GAAP Measure $ 1,098 9.6 % $ 679 $ 2.13

Business Realignment Program

(496

)

(4.3

%)

(313

)

(0.98

)

Aircraft Impairment   (100 ) (0.9 %)   (63 )   (0.20 ) GAAP Measure $ 502   4.4 % $ 303   $ 0.95    

Dollars in millions,except EPS

     

FedEx ExpressOperating

   

FedEx GroundOperating

   

FedEx FreightOperating

Income

   

Margin

Income

   

Margin

Income

   

Margin

 

Non-GAAP Measure

$

460

6.6

%

$

557

20.1

%

$

81

5.8

%

Business Realignment Program

(360

)

(5.2

%)

(93

)

(3.4

%)

(43

)

(3.1

%)

Aircraft Impairment  

(100

)

(1.4

%)

 

—

 

—

   

—

 

—

  GAAP Measure $ 0   0.0 % $ 464   16.7 % $ 38   2.7 %        

Full Year Fiscal 2013

 

FedEx Corporation

       

Diluted

Earnings

Dollars in millions, except EPS

Operating

Net

Income

   

Margin

Income

Per Share1

Non-GAAP Measure

$

3,211

7.3

%

$

1,977

$

6.23

Business Realignment Program

(560

)

(1.3

%)

(353

)

(1.11

)

Aircraft Impairment

 

(100

)

(0.2

%)

 

(63

)

 

(0.20

)

GAAP Measure

$

2,551

 

5.8

%

$

1,561

 

$

4.91

   

1 – Does not sum to total due to rounding.

 

The financial section of this release is provided on the company's website at investors.fedex.com.

Photos/Multimedia Gallery Available: http://www.businesswire.com/multimedia/home/20140618005389/en/

FedEx Corp.Media Contact:Patrick Fitzgerald, 901-818-7300orInvestor Contact:Mickey Foster, 901-818-7468Home Page: fedex.com