FedEx Corp. Reports Third Quarter Earnings Thursday March 20, 7:45 am ET
MEMPHIS, Tenn.--(BUSINESS WIRE)--FedEx Corp. (NYSE: FDX - News) today reported earnings of $1.26 per diluted share for the third quarter ended February 29, compared to $1.35 per diluted share a year ago. Last year’s third quarter included an $0.08 per diluted share benefit from a reduction in the company’s effective tax rate. “FedEx faces a challenging economic environment that includes persistently high oil prices, sluggish U.S. growth and continued concerns in the credit markets,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “We are managing our costs while positioning our portfolio of global transportation solutions to increase our profitability and returns once conditions improve.”
Third Quarter Results
FedEx Corp. reported the following consolidated results for the third quarter:
Revenue of $9.44 billion, up 10% from $8.59 billion the previous year Operating income of $641 million, unchanged from a year ago Operating margin of 6.8%, down from 7.5% the previous year Net income of $393 million, down 6% from last year’s $420 million Total combined average daily package volume in the FedEx Express and FedEx Ground segments grew 5% year over year for the quarter, due primarily to growth at FedEx Ground, FedEx International Priority® (IP) and an increase in international domestic express shipments resulting primarily from recent international acquisitions.
Third quarter operating margins declined, as higher fuel prices and a weak U.S. economy limited demand for U.S. domestic express, less-than-truckload (LTL) and copy and print services. The costs of retail service enhancement initiatives, increased marketing and technology expenses and higher expenses at FedEx Ground more than offset the benefits from lower variable compensation and favorable exchange rates.
FedEx expects earnings to be $1.60 to $1.80 per diluted share in the fourth quarter compared to $1.96 a year ago. Last year’s fourth quarter results included a $0.06 per diluted share net benefit from a settlement with Airbus related to the A380 order cancellation. This outlook assumes no additional increases to current fuel prices and no further weakening in the economy. The capital spending forecast for the year has been reduced to approximately $3.0 billion.
“Our fourth quarter earnings outlook has been impacted by higher than anticipated fuel prices and a weak U.S. economy,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “Looking ahead to our fiscal 2009, we are expecting a continuation of fourth quarter trends, which would result in limited earnings growth next year. We are scrutinizing all expenses and investments to realign them with the current environment.”
FedEx Express Segment
For the third quarter, the FedEx Express segment reported:
Revenue of $6.13 billion, up 11% from last year’s $5.52 billion Operating income of $425 million, up 8% from $395 million a year ago Operating margin of 6.9%, down from 7.2% the previous year IP package revenue grew 18% for the quarter, as IP revenue per package grew 10%, primarily due to higher fuel surcharges and favorable exchange rates. IP average daily package volume grew 6%, led by increases in