Thursday, March 19, 2015

FedEx Corporation Q3 2015 Earnings

            On March 18th, FedEx Corporation (FDX) reported their 3rd Quarter earnings. They reported an EPS of $2.01 up from $1.23 last year. This managed to beat consensus estimates of $1.87. Furthermore they missed analysts' expectations for revenue by $90 million as they reported revenues of $11.7 billion up 4% from 11.3 billion last year.  Operating income increased 50% to $962 million from $641 million last year and as a result operating margin increased to 8% from 6% last year. Finally net income increased 53% to $580 million from $378 million last year. Overall, FedEx benefited from increased volume during the past peak season, decrease in fuel costs, and their profit improvement program.
            The FedEx Express segment posted revenues of $6.66 billion compared to $6.67 billion last year. US domestic package volume grew 4% however revenue per package decreased 2%. Furthermore, international export revenue per package decreased 4%. These mixed results were as a result of lower fuel surcharges and unfavorable currency rates that offset possible revenue growth. The FedEx Ground segment posted revenues of $3.39 billion up 12% from $3.03 billion last year. Also, they had an operating income of $558 million up 14% from $490 million last year. Average daily volume for this segment grew 7%, revenue per package increased 3%, and SmartPost revenue per package increased 8%. This was mainly caused by increased rates and postage costs. The FedEx Freight segment posted revenues of $1.43 billion up 6% from $1.35 billion last year. Operating income increased 94% which led to an operating margin of 4.8% up from 2.6% last year. This was as a result of an increase of 3% in Less-than-Truckload (LTL) average daily shipments and 3% growth in LTL revenue per shipment
            Finally, FedEx projected a diluted EPS of $8.80 - $8.95 for 2015 assuming continuous moderate global economic growth. These results failed to meet analysts' expectations of $8.97 diluted EPS. Also, they maintained that capital expenditure will be $4.2 billion for 2015. As a result of their earnings report, FedEx stock price fell 1.41% to $173.30 by the time the market closed on Wednesday. Overall, although outlook for 2015 did not meet expectations, our investment thesis remains strong. FedEx Corporation is still a great company to hold on to and will continue to cut costs and expand in the future. 

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