FedEx Express sees revenues slide but profits increase

FedEx Express saw its first-quarter revenues decline as a result of lower fuel surcharges and exchange rate effects, but operating profits did improve.
The Memphis-based company’s express division, which is currently in takeover talks with TNT, recorded a 4% year-on-year decrease in its fiscal year first-quarter revenues to $6.59bn, while operating income for the period was up 45% on a year earlier to $545m.
It said the revenue slide was down to “lower fuel surcharges and unfavorable currency exchange rates”, which more than offset improved base rates.
Meanwhile, operating income improved due to higher base rates, one additional operating day, and lower international expenses due to currency exchange rates.
US domestic package volume grew by 1%, driven by growth in deferred box and overnight envelope.
US domestic revenue per package decreased 3% due to lower fuel surcharges, partially offset by strong base rates.
FedEx International Economy volume grew 4%, while FedEx International Priority volume decreased 5%.
Revenues at its freight division were flat at $1.6bn, while operating income shrank 21% to $132m.
“Operating results declined primarily due to salaries and employee benefits expense outpacing lower-than-anticipated volume,” it said.
The overall company recorded Generally Accepted Accounting Principal revenues of $12.3bn for the quarter compared with $11.7bn a year ago, while operating income reached $1.14bn from $1.06bn a year ago.
For analysts, the big news was the fact that the integrator has lowered its earnings per share expectations for the year to a range of $10.40 to $10.90, from its previous prediction of $10.60 to $11.10.
It said the lower outlook was based on weaker than expected less than truckload volumes and higher than expected self-insurance reserves and operating costs at FedEx Ground.
It also confirmed that FedEx Express, FedEx Ground and FedEx Freight will increase shipping rates by an average of 4.9% effective January 4, 2016.