FedEx Copes With Fuel Costs and Exchange Rates

With revenues reaching $7.72 billion in the fourth quarter, FedEx Corp. reported a 10% increase over the prior fiscal fourth quarter. Operating income increased at a slower 8% pace to $740 million for the quarter.

Full-year results indicated a 19% increase in revenues to $29.4 billion. Operating income reached $2.47 billion, up 72% from the prior year, and net income was up a similar 73% to $1.45 billion.

Though generally positive, Transport Intelligence noted FedEx’s results fell below analysts’ expectations due in part to the start-up costs of its westbound around-the-world flight. This caused the company’s share price to fall and carried other companies in the mail and express sector with it, according to Transport Intelligence.

FedEx also cited a timing lag associated with a fuel surcharge and competitive pricing in its domestic express market when issuing earnings guidance for the first quarter of fiscal 2006. The company also expects start up costs on the around-the-world flight to continue to affect earnings in the first quarter.

Capital spending for fiscal 2006 is estimated at $2.5 billion, including investments in the company’s highest margin service lines and addition of incremental international routes. Other targets for investment include “productivity enhancing technologies,” its aircraft fleet and sortation capacity.

Financial results for 2005 included the full-year contribution of Kinko’s.

FedEx Freight, the company’s less-than-truckload segment, reported improved yield (up 11% year over year), reflecting incremental fuel surcharges, growth in interregional freight service and higher rates, said FedEx. FedEx Freight implemented a 5.6% general rate increase on May 16.

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