The FINANCIAL — FedEx Corp. on June 21 reported a loss of $0.26 per diluted share for the fourth quarter ended May 31 compared to a loss of $3.16 per diluted share a year ago.
With adjustments, FedEx’s fourth quarter earnings were $3.30 per diluted share compared to adjusted earnings of $2.66 per diluted share a year ago, according to FedEx.
Impact per diluted share Fourth Quarter
Fiscal 2016 Fiscal 2015
Mark-to-market pension accounting adjustments ($3.47) ($4.88)
TNT Express expenses and operating results from the date of acquisition (0.34) –
FedEx Ground legal matter (0.02) (0.47)
Tax impact – corporate restructuring for TNT integration 0.28 –
Aircraft impairment and related charges – (0.62)
Changes in segment reporting – 0.15
“Fiscal 2016 was a successful year for FedEx in many ways,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “Of particular note was our corporate operating margin improvement. Our May 25 acquisition of TNT Express capped a historic year of significant accomplishments that benefited shareowners, team members and customers, and strongly positions FedEx for long-term profitable growth.”
Operating results benefited from improved yield management, the continued positive impacts from profit improvement program initiatives at FedEx Express and strong volume growth at FedEx Ground. One additional operating day and the positive net impact of fuel also benefited results.
During the quarter, the company acquired 3.8 million shares of FedEx common stock at an average price of $156.21.
Operating results benefited from profit improvement program initiatives at FedEx Express, e-commerce growth and the positive net impact of fuel. Two additional operating days also benefited the company’s transportation segments. These factors were partially offset by lower-than-anticipated revenue at FedEx Freight. Network expansion costs and self-insurance expenses at FedEx Ground and higher incentive compensation accruals also negatively impacted overall results.
Capital spending for fiscal 2016 was $4.8 billion.
For the year, the company acquired 18.2 million shares of FedEx common stock at an average price of $149.35.
Outlook
FedEx is unable to forecast the fiscal 2017 year-end mark-to-market pension accounting adjustments as well as TNT Express financial results, including the combined impact of integration expenses and financing costs. As a result, the company is unable to provide unadjusted earnings guidance. Adjusted earnings for fiscal 2017 are projected to be $11.75 to $12.25 per diluted share excluding TNT Express financial results net of integration expenses and financing costs, and the mark-to-market pension accounting adjustments. The outlook assumes continued moderate economic growth.
Capital spending for fiscal 2017 is expected to be approximately $5.1 billion, which includes ongoing expansion of the FedEx Ground network and planned aircraft deliveries to support the FedEx Express fleet modernization program. Investments in TNT Express are not included in this forecast.
“Our strong operating cash flow generation allowed us to invest in FedEx’s future this past year,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “We executed on numerous capital projects and completed the acquisition of TNT Express, our largest ever. We were especially pleased with FedEx Express’s continued improvement in operating margin, which was 11.3% in the fourth quarter.”
Revenue increased slightly as improved yield management and the benefit of one additional operating day more than offset lower fuel surcharges and unfavorable currency exchange rates.
Operating results improved due to yield management efforts, the ongoing benefits from profit improvement program initiatives and one additional operating day. Fuel had a positive year-over-year net impact on the quarter, while currency exchange rate changes had little net impact. Prior year results include the impact of aircraft impairment and related charges.
Revenue increased due to a 10% increase in FedEx Ground volume and a 7% improvement in revenue per package driven by the recording of FedEx SmartPost revenues on a gross basis versus the previous net treatment. Revenue per package was also favorably impacted by increased rates, partially offset by lower fuel surcharges.
Operating income grew due to higher volumes and increased revenue per package as well as the benefit of one additional operating day. These factors were partially offset by higher operating costs and network expansion expenses. Operating margin decreased due to the change in FedEx SmartPost revenue reporting.
Revenue increased as less-than-truckload (LTL) average daily shipment growth of 8% and the benefit from an additional operating day more than offset the impact from lower fuel surcharges and weight per shipment.
Operating income was unchanged, as improved operating efficiencies, higher revenue, and an additional operating day were offset by increased salaries and employee benefits expense and the impact from lower weight per shipment.
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