FedEx Reports Higher 1Q Earnings
OREANDA-NEWS. FedEx Corp. today reported earnings of $2.65 per diluted share ($2.90 per diluted share on an adjusted basis) for the first quarter ended August 31, compared to earnings of $2.42 per diluted share a year ago.
During the quarter, the company incurred TNT Express integration and Outlook restructuring program costs of $68 million ($45 million, net of tax, or $0.17 per diluted share). In addition, the company incurred $28 million ($21 million, net of tax, or $0.08 per diluted share) of intangible asset amortization expense for TNT Express.
“The integration of TNT Express is proceeding smoothly, and the level of team members’ engagement is outstanding,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “Managing our operating companies as a portfolio of customer solutions helped FedEx achieve strong financial and operating results in the quarter, especially given the global economy’s continued low growth.”
Operating results rose compared to last year due to higher base yields at FedEx Express and FedEx Ground, volume growth at FedEx Ground and ongoing cost efficiencies at FedEx Express. These factors were partially offset by integration and restructuring program costs and intangible asset amortization at TNT Express, and higher network expansion costs at FedEx Ground.
During the quarter, the company acquired 1.4 million shares of FedEx common stock.
FedEx is unable to forecast the fiscal 2017 year-end mark-to-market pension accounting adjustments. As a result, the company is unable to provide unadjusted earnings guidance. Adjusted earnings for fiscal 2017 are projected to be $10.85 to $11.35 per diluted share before year-end mark-to-market pension accounting adjustments. This forecast includes TNT Express results and assumes moderate economic growth. Excluding TNT Express-related integration and Outlook restructuring program costs and TNT Express intangible asset amortization, FedEx forecasts fiscal 2017 earnings of $11.85 to $12.35 per diluted share. The capital spending forecast for the fiscal year, which includes TNT Express, remains $5.6 billion.
“Our team is extremely excited about the TNT Express integration, and we are discovering many possibilities for achieving high returns,” said Alan B. Graf, FedEx Corp. executive vice president and chief financial officer. “As we integrate these networks and take advantage of the unmatched road capabilities of TNT Express, I am confident there is going to be a tremendous opportunity to increase the earnings of FedEx Corporation.”
As previously announced, effective January 2, 2017, FedEx Express will increase shipping rates by an average of 3.9%, while FedEx Ground, FedEx Home Delivery and FedEx Freight will increase shipping rates by an average of 4.9%. The FedEx Express and FedEx Ground U.S. domestic dimensional weight divisor will also change from 166 to 139. Effective February 6, 2017, FedEx Express and FedEx Ground fuel surcharges will be adjusted on a weekly basis compared to the current monthly adjustment.FedEx Express revenue increased slightly as improved base yields, higher package volume and increased freight pounds more than offset lower fuel surcharges and unfavorable currency exchange rates. U.S. domestic package volume increased 1% due to growth in overnight box and envelope volumes. FedEx International Economy volume grew 1%, while FedEx International Priority volume decreased 1%. Average daily freight pounds increased 8% due to higher U.S. Postal Service volume.
FedEx Express operating results improved due to higher base yields and ongoing cost efficiencies. As-reported results include $22 million of expenses related to the integration of TNT Express. Fuel and currency exchange rates had a minimal impact on the quarter’s results.The TNT Express as-reported results include $28 million of intangible asset amortization expense and $20 million of integration and Outlook restructuring program costs.
Revenue increased due to higher volume and revenue per package. FedEx Ground average daily volume grew 10% in the first quarter, driven by e–commerce and commercial package growth. FedEx Ground yield increased 2% due to higher base yields partially offset by lower fuel surcharges.
Operating results improved due to higher volumes, increased yields and lower self-insurance costs, partially offset by higher network expansion costs and increased purchased transportation rates including higher postage.