By Chelsey Dulaney
FedEx Corp., in the midst of its holiday shipping rush, reported
earnings for its November quarter that increased less than
expected, though the shipping giant benefited from higher volumes
and margins.
FedEx said high aircraft maintenance expenses were a drag on its
bottom line in the quarter. Shares fell 4.3% in premarket trading,
dragging down rival United Parcel Service Inc., which was off
1.5%.
With more than 600 aircraft and 90,000 vehicles, FedEx has been
benefiting from falling fuel prices. The company's restructuring of
its air-express division has also helped drive higher profits.
Those measures include modernizing its air fleet to improve fuel
efficiency and offering buyouts to about 3,600 employees, who have
since left the company.
Operating margin improved to 8.5% in its fiscal second quarter,
up from 7.3% a year ago.
Overall, FedEx posted a profit of $616 million, or $2.14 a
share, up from $500 million, or $1.57 a share, in the year-earlier
period. Revenue rose 5% to $11.9 billion.
Analysts polled by Thomson Reuters recently expected per-share
earnings of $2.22 and revenue of $11.99 billion.
Revenue in its ground segment increased 8% to $3.06 billion on a
5% jump in average daily package volume. The segment has benefited
from growth in e-commerce in recent quarters.
FedEx has been bulking up its e-commerce services through a
string of recent acquisitions. The company on Tuesday said it
acquired privately held Bongo International, adding a provider of
services that enable international e-commerce orders and shipments.
The deal came a day after FedEx agreed to buy logistics provider
Genco.
The company's biggest segment, express, posted a 3% increase in
revenue to $7.02 billion as U.S. domestic package volume rose,
particularly for overnight shipments.
FedEx said its freight segment's revenue grew 11% to $1.59
billion, driven by increased shipments and higher demand for
priority service.
The company said it remains on track to meet its ambitious goal
of posting $8.50 to $9 a share in earnings for the year.
FedEx is the first delivery company to report how its holiday
season is shaping up, after many were caught off guard last year by
surging shipments and bad weather. Though FedEx's quarter ended
Nov. 30, it includes some of the post-Thanksgiving rush.
This holiday season, FedEx has worked to enhance its network and
accelerate delivery speeds, introducing new technology reporting
systems to help with planning.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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