Yahoo Finance FedEx Releases Quarterly Results
- By Mayank Marwah
FedEx Corp. (FDX) recently released its second-quarter earnings. The company failed to surpass analyst estimations. Earnings per share came in at $2.80. The company's bottom line was hampered by increasing costs. However, FedEx managed to register a gain of 8.53% in profit compared with the same period last year. Here is a closer look at the company's quarterly performance.
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The intrinsic value of FDX
A snapshot of the quarter
The courier giant's second quarter revenue surged 19.9% to $14,931 million compared with last year. FedEx's operating income improved 2.6% during the quarter. This was due to the improvement in FedEx's Ground and Freight segments, boosting the company's bottom line for the quarter.
The increase in revenue and operating income can also be attributed to the inclusion of the TNT Express business during the quarter.
Segment performance
FedEx Express recorded revenue growth of 2.4% to $6,743 million and operating income grew 2.3% to $636 million. The margin of the segment remains stable at 9.4%. It should be noted that the segment's results were supported by increased prices. The composite package yield for the Express segment rose to $19.80 during the quarter compared with $19.52 in the comparable period last year.
FedEx's Ground segment recorded a revenue increase of 9.1% to $4,419 million. However, the segment's operating income dropped 11.6% to $465 million. The segment's revenue growth is attributable to the 5% rise in average daily volume due to e-commerce and commercial package growth. However, the company witnessed margin pressure due to the increasing cost of e-commerce. Around two-thirds of the company's operating expenses in Ground was on account of e-commerce staffing and transportation. The company's bottom line suffered from its Grounds business due to higher rent, depreciation, staffing and transportation rates. Rival United Parcel Service (UPS) is also witnessing the same pressure as its e-commerce service expenses grow.
As far as FedEx's integration with TNT Express is concerned, the company is in the early stages of experiencing synergies from integration. At the earnings press release, FedEx CEO Fred Smith said that the assimilation "is proceeding smoothly and according to plan." TNT Express generated revenue of $1,899 million and recorded operating income of $70 million.
However, its Freight segment has been combatting the weakness seen in the transportation industry. The segment's revenue surged 9.1% to $1,597 million while operating income declined 12.9% to $88 million.
Looking ahead
Since FedEx faces severe competition from United Parcel Service, the company hired 50,000 seasonal workers for the holiday season. However, the actual performance during the holiday season can only be measured in the third quarter results.
Smith said in the press release, "FedEx increased revenues and operating income despite continued low growth rates in the global economy. We are in the home stretch of our peak shipping season, and our service levels are high thanks to the outstanding efforts of our hundreds of thousands of team members around the world."
Management increased its full-year 2017 earnings outlook. FedEx expected earnings per share to be in the range of $10.95 to $11.45 for fiscal 2017. The company had earlier forecasted EPS of $10.85 to $11.35. It will be interesting to see how FedEx performs in the second half of the fiscal.
Disclosure: I do not hold any position in the stock/s mentioned in this article.
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This article first appeared on GuruFocus.
Warning! GuruFocus has detected 5 Warning Signs with FDX. Click here to check it out.
The intrinsic value of FDX
