FedEx (FDX) Reports Strong Earnings Due to E-Commerce
Federal Express Corp (FDX) has reported quarterly earnings for fiscal 2015 showing strong performance. The stock is currently up about 3.73% trading at $160.43 per share.
The business services company reported first quarter revenue of $11.7 billion, up about 6% from $11.0 billion in the previous year and beating analyst expectations of $11.4 billion. Net income for the first quarter was reported at $606 million, up about 24% from $489 million last year and reported first quarter earnings of $2.10 per diluted share beating analyst expectations of $1.95 earnings per share.
“FedEx Corp. is off to an outstanding start in fiscal 2015, thanks to very strong performance at FedEx Ground, solid volume and revenue increases at FedEx Freight and healthy growth in U.S. domestic volume at FedEx Express,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “More customers are relying on FedEx because they appreciate the competitive advantages provided by our broad portfolio of solutions.”
FedEx shares have risen nearly 10% this year, vs. 9% for the S&P 500. FedEx’s stock has jumped 47% the past 12 months vs. the S&P 500’s 17.75% gain.
FDX vs. S&P Stock Return Comparison
Share Buyback
During the quarter, the company acquired 5.3 million shares of FedEx common stock. As of August 31, 2014, no shares remained under the existing share repurchase authorizations. Share repurchases benefited earnings in the quarter by $0.15 per diluted share.
Rate Hike
FedEx said that it will raise U.S. rates for express, ground and home-delivery shipments by an average of 4.9 percent, effective January 5, 2015. It said that rates would also change for FedEx SmartPost, which uses the U.S. Postal Service for final delivery, although it didn't say how much. The express increase will apply to deliveries in, to or from the U.S. FedEx Freight will also boost prices an average of 4.9 percent within North America.
Fiscal 2015 Outlook
FedEx reaffirmed its fiscal 2015 earnings forecast of $8.50 to $9.00 per diluted share. The outlook assumes no net year-over-year fuel impact and continued moderate economic growth. The capital spending forecast for fiscal 2015 remains $4.2 billion.
“FedEx reported strong first quarter results, as all three of our transportation segments drove higher revenues and improved profitability year over year,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “Our profit improvement programs are progressing as planned and we continue to expect strong earnings growth this year.”
Bottom Line
FedEx definitely felt the advantage from growth in online shopping which generates strong business in ground shipments. That helps to offset some lack in productivity in FedEx’s core express delivery unit. With rates rising for ground shipments after the holidays, partnerships and vendors of FedEx should be taking advantage this upcoming holiday season while rates are unchanged. FedEx is going into the holiday season with strong earnings and top line revenue, and FedEx should be seeing solid growth for their fiscal 2Q 2015.
We currently have FedEx as a Zacks Rank #2 (buy) though it has had a hard time beating estimates, posting an average miss of 4.12% this past year but investors should be accounting for the strongest retail time of the year in the coming months. 100% of analysts have upgraded their earnings estimate for the current quarter and the current year. Investors should keep this company in mind especially as the holiday season rolls around the corner and as more e-commerce and FDX’s price hike help to grow this important company’s top and bottom lines.
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