FedEx profit rises 24 percent

FedEx profit increased by 24% in the first quarter ending August 31, driven by higher shipment volume in its ground division. The world’s second largest package delivery company posted net income of $606 million ($2.10 per diluted share), thirty-seven percent higher than $489 million ($1.53 per diluted share) in the same quarter in 2013.

Results beat Street expectations. Shares climbed before markets opened on Wednesday.

Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer, said:

“FedEx Corp. is off to an outstanding start in fiscal 2015, thanks to very strong performance at FedEx Ground, solid volume and revenue increases at FedEx Freight and healthy growth in U.S. domestic volume at FedEx Express. More customers are relying on FedEx because they appreciate the competitive advantages provided by our broad portfolio of solutions.”

FedEx had suffered a downturn recently as customers opted for slower but cheaper deliveries. The company responded by revamping its routes, reducing capacity to Asia-Pacific and other foreign destinations.

Below are some highlighted data from the first quarter results:

• Revenue: $11.7 billion, 6% higher than $11 billion in Q1 last year,

• Operating Income: $987 million, 24% up on last year’s $795 million,

• Operating Margin: 8.5%, compared to 7.2% last year,

• Net Income: $606 million, 24% increase on last year’s $489 million.

Operating income grew mainly because of greater volumes and higher yields at all three transportation segments.

Lower pension expense, plus the company’s profit improvement programs were partly offset by higher aircraft maintenance costs.

In the first quarter, FedEx bought 5.3 million shares of common stock. As of Aug. 31, no shares remain under the existing share repurchase authorizations.

FedEx outlook

FedEx continues to forecast earnings between $8.50 and $9 per diluted share for fiscal 2015. The outlook assumes that fuel prices will not suddenly shoot up and that the economy will grow moderately. Earnings, in this context, refers to profits over a certain period.

The company predicts capital spending for fiscal 2015 will be $4.2 billion.

Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer, said:

“FedEx reported strong first quarter results, as all three of our transportation segments drove higher revenues and improved profitability year over year. Our profit improvement programs are progressing as planned and we continue to expect strong earnings growth this year.”

Yesterday, the company said it would increase US rates for express, ground and home-delivery shipments by 4.9% (average) as from January 2015. It added that prices would change for FedEx SmartPost, which uses the national Postal Service for final delivery – it did not specify exactly how much the increase would be.

In May, FedEx said it would begin increasing prices for bigger but lighter packages that use up a lot of space and raise delivery costs, including many products people buy online. United Parcel service said it would do the same.