FedEx Corp. Falls Short of Q3 Profit Forecasts

FedEx Corp. Falls Short of Q3 Profit Forecasts

FedEx Corp. Falls Short of Q3 Profit Forecasts

The FINANCIAL -- FedEx Corp. on March 21 reported earnings of $2.07 per diluted share ($2.35 per diluted share on an adjusted basis) for the third quarter ended February 28, compared to earnings of $1.84 per diluted share a year ago ($2.51 per diluted share last year on an adjusted basis).

“Our worldwide FedEx team delivered an outstanding peak season. Even with our highest volumes ever, we achieved record service levels,” said Frederick W. Smith, FedEx Corp. chairman and chief executive officer. “We are confident our strategic investments to expand our global scope and portfolio of solutions position FedEx for greater long-term profitable growth as we adapt to meet the evolving needs of our customers.”

Operating results were impacted by the significantly negative net impact of fuel and one fewer operating day at FedEx Express and FedEx Ground, and network expansion at FedEx Ground. These factors were partially offset by the benefits from yield growth at all of the company’s transportation segments, according to FedEx.

Outlook

FedEx is unable to forecast the fiscal 2017 year-end mark-to-market (“MTM”) pension accounting adjustments. As a result, the company is unable to provide fiscal 2017 earnings guidance on a GAAP basis.

Before year-end MTM pension accounting adjustments, earnings are now projected to be $10.80 to $11.30 per diluted share for fiscal 2017. This forecast includes TNT Express results and assumes moderate economic growth. The earnings forecast before year-end MTM pension accounting adjustments and excluding TNT Express integration expenses, including restructuring charges, and intangible asset amortization remains $11.85 to $12.35 per diluted share for fiscal 2017. The capital spending forecast for the fiscal year is now $5.3 billion, down $300 million, due to a reduced FedEx Ground spending forecast.

The company is targeting operating income improvement at the FedEx Express group of $1.2 billion to $1.5 billion in fiscal 2020 versus fiscal 2017, assuming moderate economic growth and current accounting and tax rules. The operating income target includes expected TNT Express synergies as well as base business and other operational improvements across the global FedEx Express network.

“During the next three years, the benefits of the TNT Express integration, fleet modernization, yield management, e-commerce growth and investments in network capabilities and efficiency will drive significant earnings growth,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer.

Revenue increased 3% as higher base rates and package volume were partially offset by the negative impact from one fewer operating day.

Operating income declined due to the significantly negative net impact of fuel and one fewer operating day. As-reported results include $31 million of expenses related to the integration of TNT Express.

The TNT Express as-reported results include $16 million of intangible asset amortization expense and $22 million of integration expenses, including restructuring charges.

Revenue increased as higher base rates and commercial volume growth were partially offset by lower residential volume, driven by yield management actions, and the negative impact from one fewer operating day.

Operating results decreased due to higher rent, depreciation and staffing as a result of network expansion, the negative net fuel impact and one fewer operating day.

Revenue increased due to higher base rates and fuel surcharges. Average daily shipments were flat as the company focuses on revenue quality in a continued weak U.S. industrial environment.

Operating results decreased due to the impact from higher salaries and wages and increased information technology expenses.