FedEx’s revenue up, but operating income down in Q3

Express operator FedEx has reported revenue reached $16.5 billion in the third quarter (Q3) of its financial year in the three months ending on 28 February.

This was a rise on the $15bn achieved in Q3 last year. Operating income for Q3 in the current financial year was down to $1bn, much the same as Q3 last year.

FedEx said operating results benefited from higher base rates, increased volume at FedEx Ground and FedEx Freight, and a favourable net impact from fuel.

Results were negatively affected by significantly higher variable compensation accruals, increased peak-related costs at FedEx Express and the impact of adverse weather.

In Q3, the FedEx Express segment’s revenue was $9.37bn, the same as the in Q3 last year.
Revenue increased due to improved base rates, currency exchange rates and higher fuel surcharges, despite a lingering impact from the June cyber attack affecting TNT Express.

Total package volume declined one per cent, as lower international domestic and US domestic volumes offset international export package volume growth of one per cent. Average daily freight pounds increased three per cent on higher volume in both international and US freight services.

In Q3, the FedEx Ground segment’s revenue was $5.22bn, an 11 per cent rise on the $4.69bn in Q3 last year. Strong revenue growth was driven by average daily package volume growth of six per cent and higher base rates.

In Q3, the FedEx Freight division’s revenue was $1.69bn, a 14 per cent uplift on the $1.49bn in Q3 last year. Revenue increased due to less-than-truckload (LTL) revenue per shipment growth of eight per cent and average daily LTL shipment growth of six per cent.

FedEx chairman and chief executive, Frederick Smith said: “Execution of our long-term growth strategies, customer demand for the unique value of our broad portfolio of solutions and healthy growth in the global economy are driving our performance.”

Looking ahead, Smith added: “We expect strong operating performance in each of our transportation segments in the fourth quarter.”

FedEx executive vice president and chief financial officer, Alan Graf said: “We are increasing our fiscal 2018 earnings outlook due to foreign tax benefits from our international corporate structure, the benefits from US tax reform and improved operating performance.

“We remain committed to improving operating income at the FedEx Express segment by $1.2 to $1.5 billion in fiscal 2020 versus fiscal 2017.”