FedEx Corp. has reported earnings of $1.33 per diluted share for the fourth quarter ended May 31, compared to last year's $2.82 per diluted share. For the fourth quarter, the company reported revenue of $9.43 billion, up 20% from $7.85 billion the previous year; operating income of $696 million, up from an operating loss of $849 million last year; operating margin of 7.4%, up from (10.8%) the previous year and a net income of $419 million, up from last year's net loss of $876 million.
Earnings increased as a result of stronger shipment growth in international express and continued growth at FedEx Ground. An operating loss at FedEx Freight, the reinstatement of certain employee compensation programs and higher aircraft maintenance expenses impacted the quarter's results.
For the full year, FedEx Corp. reported revenue of $34.7 billion, down 2% from $35.5 billion the previous year; an operating income of $2.0 billion, up from $747 million last year; net income of $1.18 billion, up from last year's $98 million; and earnings per share of $3.76 which was up from $0.31 per share a year ago. The capital spending for fiscal 2010 was $2.8 billion, with $1.5 billion of investments largely related to more fuel-efficient aircraft, including the delivery of six Boeing 777Fs for use in the international network and 12 Boeing 757s.
FedEx projects earnings to be $0.85 to $1.05 per diluted share in the first quarter and $4.40 to $5.00 per diluted share for fiscal 2011. The company reported earnings of $0.58 per diluted share in last year's first quarter. The capital spending forecast for fiscal 2011 is $3.2 billion, which includes the expected delivery of six Boeing 777Fs and 16 Boeing 757s, along with investments in information technology, vehicles and facilities in support of the company's global growth strategy.
"We expect continued improvement in both revenue and earnings in fiscal 2011," says Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "Resumed growth in industrial production and global trade is increasing demand for our transportation services, and yield management remains a top priority across all of our operating companies. However, we expect the growth in earnings in fiscal 2011 to be constrained by significant increases in fixed pension and volume-related aircraft maintenance expenses, along with higher anticipated healthcare costs. In addition, our earnings guidance includes increased costs related to the planned reinstatement of various employee compensation programs."
FedEx Freight Segment
For the fourth quarter, the FedEx Freight segment reported:
• Revenue of $1.23 billion, up 30% from last year's $948 million
• Operating loss of $36 million, compared with an operating loss of $106 million a year ago
• Operating margin of (2.9%), compared with (11.2%) the previous year
Less-than-truckload (LTL) average daily shipments increased 34% and LTL yield declined 6% year over year due to the effects of discounted pricing. Operating losses in the quarter were driven by lower yields and higher volume-related costs. The quarter's operating loss also reflects an $18 million impairment charge related to the goodwill associated with the acquisition of Watkins Motor Lines (now FedEx National LTL).
FedEx Express Segment
For the fourth quarter, the FedEx Express segment reported:
• Revenue of $5.88 billion, up 23% from last year's $4.80 billion
• Operating income of $413 million, up from an operating loss of $136 million a year ago
• Operating margin of 7.0%, up from (2.8%) the previous year.
FedEx International Priority (IP) average daily package volume increased 23%, led by exports from Asia. IP revenue per package grew 6% due to higher weight per package, higher fuel surcharges and a favorable exchange rate impact. U.S. domestic revenue per package grew 8% due to higher fuel surcharges and improved weight per package, while average daily package volume increased 1%.
Operating profit and margin improvements were driven by volume and revenue growth, particularly in higher-margin IP package and freight services. Results also include the partial reinstatement of certain employee compensation programs and higher aircraft maintenance expenses. FedEx Express added a ninth scheduled daily transpacific frequency in April, utilizing the capabilities of Boeing 777F aircraft. This additional frequency provides needed capacity from Asia to the U.S., and allows best-in-market cut-off times. Also in April, a third scheduled daily flight was added from Asia to Europe.
FedEx Ground Segment
For the fourth quarter, the FedEx Ground segment reported:
• Revenue of $1.96 billion, up 15% from last year's $1.70 billion
• Operating income of $319 million, up 57% from $203 million a year ago
• Operating margin of 16.3%, up from 11.9% the previous year
FedEx Ground average daily package volume grew 7% in the fourth quarter driven by increases in the business-to-business market and the FedEx Home Delivery service. Yield increased 5% primarily due to higher fuel surcharges. FedEx SmartPost average daily volume increased 23%, with yield increasing 6%. Operating income and margin increased due to higher package yield and volume, as well as lower self-insurance expenses and improved productivity.
FedEx Services Segment
FedEx Services segment revenue for the fourth quarter, which included the operations of FedEx Office, was down 6% year over year, due to the September 1, 2009 realignment of FedEx Supply Chain Systems to the FedEx Express reporting segment and declines in copy product revenues. Last year's fourth quarter results for FedEx Services included an $810 million goodwill impairment charge related to the acquisition of Kinko's (now FedEx Office).