FedEx Corp. Reports Third Quarter Results
Operating Results Significantly Impacted by Severe Winter Weather
MEMPHIS, Tenn. -- March 19, 2014
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 "ver ...
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
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.
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
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
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
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%.
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 MEASURES
TO 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.
Non-GAAP Measure $ 1.23
Business Realignment Costs
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
Photos/Multimedia Gallery Available:
Jess Bunn, 901-818-7463
Mickey Foster, 901-818-7468
Home Page: fedex.com
Press spacebar to pause and continue. Press esc to stop.