OREANDA-NEWS. FedEx Corp. today reported earnings of \$2.01 per diluted share for the third quarter ended February 28, compared to \$1.23 per share last year.

“We had a very successful peak season as volumes grew across all transportation segments, and our profit improvement programs are moving ahead as scheduled,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “We believe our strategy is sound, our culture is unique, and our customers value our broad portfolio of business solutions.”

Third Quarter Results

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

  • Revenue of \$11.7 billion, up 4% from \$11.3 billion the previous year
  • Operating income of \$962 million, up 50% from \$641 million last year
  • Operating margin of 8.2%, up from 5.7% the previous year
  • Net income of \$580 million, up 53% from last year’s \$378 million

Operating results improved due to volume and base yield growth in all three transportation segments, a significant net benefit from fuel, benefits from profit improvement program initiatives, a lower year-over-year weather impact and reduced pension expense. These improvements were partially offset by higher variable incentive compensation accruals.

Share repurchases had a \$0.11 year-over-year positive impact on third quarter earnings per diluted share.

Outlook

FedEx projects earnings to be \$8.80 to \$8.95 per diluted share for fiscal 2015. This outlook assumes continued moderate global economic growth. The capital spending forecast for fiscal 2015 remains \$4.2 billion.

“We expect continued revenue and earnings growth this year, driven by ongoing improvements in all of our transportation segments,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “Variable incentive compensation accruals will continue to increase as our financial performance improves, and we expect to deliver record fourth quarter and fiscal year earnings.”

FedEx Express Segment

For the third quarter, the FedEx Express segment reported:

  • Revenue of \$6.66 billion, compared to last year’s \$6.67 billion
  • Operating income of \$384 million, up 129% from \$168 million a year ago
  • Operating margin of 5.8%, up from 2.5% the previous year

Revenue was essentially flat, as lower fuel surcharges and unfavorable currency exchange rates more than offset volume and base yield growth. U.S. domestic package volume grew by 4%, including 5% growth in overnight box. U.S. domestic revenue per package decreased 2% due to lower fuel surcharges, partially offset by higher base rates. FedEx International Economy volume grew 4%, while FedEx International Priority volume was flat. International export revenue per package decreased 4%, as lower fuel surcharges and unfavorable currency exchange rates were partially offset by favorable service mix and higher rates.

Operating results were higher as increased base revenue, a significant net benefit from fuel and a lower year-over-year weather impact all contributed to the quarter. In addition, the company continued to benefit from profit improvement program initiatives. Partially offsetting these favorable factors were increased variable incentive compensation accruals and aircraft maintenance expenses.

FedEx Ground Segment

For the third quarter, the FedEx Ground segment reported:

  • Revenue of \$3.39 billion, up 12% from last year’s \$3.03 billion
  • Operating income of \$558 million, up 14% from \$490 million a year ago
  • Operating margin of 16.4%, up from 16.2% the previous year

FedEx Ground average daily volume grew 7% in the third quarter due to growth in both business to business and home delivery services. Revenue per package increased 3% due to base rate increases and higher dimensional weight charges. FedEx SmartPost average daily volume decreased 7% due to the reduction in volume from a major customer. SmartPost revenue per package increased 8% due to rate increases and improved customer mix, partially offset by higher postage costs.

Operating results increased due to higher revenue per package, volume growth, a net benefit from fuel and a lower year-over-year weather impact, partially offset by network expansion costs.

FedEx Corp. completed the acquisition of third-party logistics provider GENCO Distribution System, Inc. on January 30, 2015. The financial results of GENCO are included within the FedEx Ground segment from the date of acquisition. GENCO had an immaterial impact on the quarter’s results.

FedEx Freight Segment

For the third quarter, the FedEx Freight segment reported:

  • Revenue of \$1.43 billion, up 6% from last year’s \$1.35 billion
  • Operating income of \$68 million, up 94% from \$35 million a year ago
  • Operating margin of 4.8%, up from 2.6% the previous year

Less-than-truckload (LTL) average daily shipments increased 3%, while LTL revenue per shipment grew 3% due to higher rates.

Operating results improved due to the positive impacts of higher LTL revenue per shipment and higher average daily LTL shipments.