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FedEx Delivers Growth—Especially on the Ground

Althea Chang
Big Data Download
FedEx Delivers Growth—Especially on the Ground

FedEx reported fiscal fourth-quarter earnings before the bell. Ex-items, the shipping company posted earnings of $679 million, or $2.13 a share, topping analysts’ consensus estimates of $1.96 per share. The outperformance came as a result of increased business, as well as lower costs attributable to a decrease in jet fuel prices.

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FedEx’s Express is its biggest business, bringing in half the company’s revenue, but it’s weak—the growth engine for FedEx remains on the ground.
Fiscal fourth-quarter daily ground volume growth came in at 10 percent versus 9.9 percent the previous quarter. Ground volume growth for FedEx rival UPS came in at 4.8 percent for the quarter, according to Donald Broughton, managing director at investment banking firm Avondale Partners.

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FedEx Ground’s growth is driven in part by its truck operators, who are independent owner-operators, according to Broughton. At FedEx, all drivers own their own routes making them more aggressive at expanding their delivery areas. UPS drivers are paid per hour, according to Broughton.

UPS confirmed to CNBC that its drivers are paid by the hour, according to their collective bargaining agreement.

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With regard to FedEx Express, the company has been focusing lately on modernizing its aircraft fleet by retiring older planes.

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