Operating Results Significantly Impacted by
Severe Winter Weather
FedEx Corp. (NYSE: FDX) today reported earnings of $1.23 per
diluted share for the third quarter ended February 28, compared to
$1.13 per share last year. Unusually severe winter storms
throughout the quarter disrupted operations, decreasing shipping
volume and increasing costs, and impacted year-over-year operating
income by an estimated $125 million. Last year’s third quarter
results were impacted by business realignment costs totaling $47
million, primarily related to the company’s voluntary buyout
program for eligible U.S. officers and managing directors.
Excluding the realignment costs, last year’s third quarter earnings
were $1.23 per diluted share.
Frederick W. Smith, chairman, president
and chief executive officer of FedEx Corp., said he was "very proud
of the FedEx team" for delivering outstanding service to customers
during the company's third quarter despite severe weather. (Photo:
Business Wire)
“Historically severe winter weather significantly affected our
third-quarter earnings,” said Frederick W. Smith, FedEx Corp.
chairman, president and chief executive officer. “On days when the
weather was closer to normal seasonal conditions, our volumes were
solid and service levels were high. The FedEx strategy of
maintaining separate express and ground networks with multiple hubs
proved to be an especially important advantage for our package
customers during this quarter’s severe weather and peak
shipping.”
Third Quarter Results
FedEx Corp. reported the following consolidated results for the
third quarter:
• Revenue of $11.3 billion, up 3% from $11.0 billion the
previous year
• Operating income of $641 million, up 9% from $589 million last
year
• Operating margin of 5.7%, up from 5.4% the previous year
• Net income of $378 million, up 5% from last year’s $361
million
Operating results increased despite the impact of severe winter
weather. Results also include a negative net impact from fuel.
These headwinds were partially offset by the benefit from one
additional operating day in each transportation segment.
During the third quarter, the company entered into accelerated
share repurchase agreements to repurchase an aggregate of $2.0
billion of the company’s common stock. Share repurchases had a
minimal positive impact on third quarter earnings per diluted
share.
Outlook
FedEx projects earnings to be $2.25 to $2.50 per diluted share
in the fourth quarter and $6.55 to $6.80 per diluted share for
fiscal 2014. This outlook reflects share repurchases made to date,
but does not include any benefit from additional share repurchases.
Share repurchases are expected to continue, but the timing will be
at the company’s discretion. The outlook also assumes the market
outlook for fuel prices and continued moderate economic growth. The
capital spending forecast for fiscal 2014 is now $3.8 billion, down
$200 million from the previous forecast.
“While severe winter weather often affects our third-quarter
results, the impact from multiple severe storms and frigid
temperatures was significantly more pronounced this year and we are
reducing our full-year earnings per share guidance as a result of
the weather impact,” said Alan B. Graf, Jr., FedEx Corp. executive
vice president and chief financial officer. “The $1.6 billion
profit improvement plan at FedEx Express remains on track despite
the near-term impact of weather. Our accelerated stock repurchase
program initiated in January reflects our confidence in achieving
our financial goals.”
FedEx Express Segment
For the third quarter, the FedEx Express segment reported:
• Revenue of $6.67 billion, down slightly from last year’s $6.70
billion
• Operating income of $135 million, up 14% from $118 million a
year ago
• Operating margin of 2.0%, up from 1.8% the previous year
Revenue decreased slightly due to lower freight revenue, lower
fuel surcharges and the impact from weather. U.S. domestic revenue
per package was up slightly, as higher rates and weight per package
were mostly offset by lower fuel surcharges. U.S. domestic average
daily package volume increased slightly.
International export revenue per package increased 1%, as higher
base yields were partially offset by lower fuel surcharges,
unfavorable exchange rates, and the ongoing demand shift toward
lower-yielding international services. FedEx International
Priority® (IP) average daily volume declined 5%, due to a drop in
lower-yielding distribution services. IP average daily volume,
excluding these distribution services, was essentially flat. FedEx
International Economy® average daily volume grew 8%.
Operating results increased year over year despite the impact of
weather, which reduced operating income by an estimated $70 million
compared to the prior year. Benefiting the quarter were higher base
package yields, lower pension expense, one additional operating day
and ongoing cost reduction activities, partially offset by lower
freight revenue and the negative net impact of fuel.
FedEx Ground Segment
For the third quarter, the FedEx Ground segment reported:
• Revenue of $3.03 billion, up 10% from last year’s $2.75
billion
• Operating income of $477 million, up 2% from $467 million a
year ago
• Operating margin of 15.7%, down from 17.0% the previous
year
FedEx Ground average daily volume grew 8% in the third quarter,
as growth in both FedEx Home Delivery and business to business
services was driven by market share gains. Revenue per package
increased 1% due to rate increases and higher residential
surcharges, partially offset by lower fuel surcharges. FedEx
SmartPost average daily volume increased 2%. FedEx SmartPost net
revenue per package increased 3% due to rate increases and service
mix, partially offset by higher postage rates and lower fuel
surcharges.
Operating income increased due to higher volume and revenue per
package. The third quarter was favorably impacted by Cyber Week,
which was in the second quarter last year, as well as one
additional operating day. The favorability was significantly offset
by an estimated $40 million year-over-year impact on operating
income from weather, as well as increased network expansion costs
and the negative net impact of fuel.
FedEx Freight Segment
For the third quarter, the FedEx Freight segment reported:
• Revenue of $1.35 billion, up 9% from last year’s $1.24
billion
• Operating income of $29 million, up from $4 million a year
ago
• Operating margin of 2.2%, up from 0.3% the previous year
Less-than-truckload (LTL) average daily shipments and weight per
shipment increased 7% and 2%, respectively. LTL revenue per
hundredweight decreased 2% primarily due to changes in shipment
characteristics and lower fuel surcharges.
Operating income improved as the positive impacts of higher
shipment volumes, heavier average weight per shipment, greater
utilization of rail in the Economy service offering and one
additional business day were partially offset by the impact of
weather.
Effective March 31, 2014, FedEx Freight will increase certain
U.S. and other shipping rates by an average of 3.9%.
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 $45 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 third 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 March 19 are available on the company’s website at investors.fedex.com. A replay of the conference
call webcast will be posted on our website 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, legal
challenges or changes related to FedEx Ground’s owner-operators,
our ability to execute on our business realignment program, 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 historical
and expected 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 from prior period
results will allow for more accurate comparisons of the company’s
third quarter operating performance. As required by SEC rules, the
table below presents a reconciliation of our presented non-GAAP
measure to the most directly comparable GAAP measure.
Q3 FY2013DilutedEarnings
PerShare
Non-GAAP Measure
$
1.23
Business Realignment Costs
(0.09
)
GAAP Measure
$
1.13
*
*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/20140319005360/en/
FedEx Corp.Media Contact:Jess Bunn, 901-818-7463orInvestor
Contact:Mickey Foster, 901-818-7468Home Page: fedex.com
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