The Memphis, Tenn.-based integrator posted a net income of $1.82 billion on revenues of $50.4 billion for the fiscal year 2016, which ended May 31, year-over-year increases of 73.3 percent and 6.1 percent, respectively.
FedEx Corp. narrowed its losses considerably in the fourth quarter of fiscal year 2016, which ended May 31, according to the company’s most recent financial statements.
The Memphis, Tenn.-based integrator posted a net loss of $70 million, or $0.26 per share, for the quarter compared with an $895 million loss, $3.16 per share, the previous year.
After adjusting for mark-to-market pension accounting, a legal matter concerning drivers with the FedEx Ground segment, as well as expenses and operating results from the company’s acquisition of TNT Express, however, FedEx said earnings stood at $897 million, a 19.1 percent increase from the same 2015 period. FedEx in late May officially completed its 4.4 billion euro (U.S. $4.9 billion) purchase of the Netherlands-based global express carrier TNT Express.
Diluted earnings per share (EPS) grew from $2.66 per share in the fourth quarter of fiscal 2015 to $3.30 per share in the fourth quarter of fiscal 2016, beating consensus analyst estimates by $0.02 per share. FedEx’s quarterly revenues of $13 billion, up 7.4 percent from the previous year, beat consensus estimates by $220 million.
The company noted its operating results during the latest quarter benefited from improved yield management, profit improvement program initiatives at FedEx Express and strong volume growth at FedEx Ground.
For the full fiscal year, also ended May 31, FedEx reported a net income of $1.82 billion on revenues of $50.4 billion, year-over-year increases of 73.3 percent and 6.1 percent, respectively. Diluted EPS surged to $6.51 per share from $3.65 per share the previous year.
Capital expenditures for fiscal 2016 stood at $4.8 billion.
“Fiscal 2016 was a successful year for FedEx in many ways,” FedEx Corp. Chairman and CEO Frederick W. Smith said of the results. “Of particular note was our corporate operating margin improvement. Our May 25 acquisition of TNT Express capped a historic year of significant accomplishments that benefited shareowners, team members and customers, and strongly positions FedEx for long-term profitable growth.”
FedEx stock fell just 0.3 percent on the news yesterday – from $164.47 per share at close of business on Monday to $163.95 per share – but dropped another 4.2 percent to $157.09 per share by 10 a.m. this morning. Shares have since rebounded slightly, reaching $158.73 by 11 a.m. in New York.
“While we believe the quarter was solid, we understand that the combination of muted guidance and noise from the TNT deal takes some wind out of the sails and is causing the stock to trade down Wednesday,” analysts with William Blair Equity Research wrote in a client note. “Unfortunately, this overhang could be with the company for some time.
“However, as the company provides more information and hopefully investors gain confidence in concrete figures and a better understanding of integration specifics, we believe the stock should ultimately move higher over the next 12 months,” the firm added.
The company saw operating income at the FedEx Express segment skyrocket 135 percent year-over-year to $757 million in fourth quarter fiscal 2016, with operating results improving due to yield management efforts, profit improvement program initiatives, and a positive net impact from fuel surcharges. FedEx noted that the previous year’s results also included the negative impact of aircraft impairment and related charges. The Express segment’s revenues were relatively flat, inching up just 0.3 percent to $6.72 billion compared with FY2015.
Meanwhile, the FedEx Ground unit posted an operating income of $656 million for the quarter, up 8.8 percent from the same 2015 period. Ground revenues grew 20.2 percent year-over-year to $4.29 billion, thanks to a 10 percent bump in shipment volumes and a 7 percent improvement in revenue per package.
Operating income for the FedEx Freight segment was flat for the fourth quarter at $137 million on revenues that ticked up 2.5 percent to $1.61 billion. The higher revenues, driven by an 8 percent increase in average daily package volumes, were offset by increased salaries and employee benefit expenses and lower weight per shipment.
Looking forward to fiscal 2017, the company said it would not provide unadjusted earnings guidance because it is unable to forecast year-end mark-to-market pension accounting adjustments and the impact of the TNT Express integration.
FedEx projects adjusted diluted EPS for fiscal 2017 to be in the range of $11.75 per share to $12.25 per share, excluding the abovementioned factors and assuming “continued moderate economic growth.” Analysts forecast FY2017 EPS at $11.96 per share, according to the average of nine estimates compiled by Bloomberg.
FedEx said capital spending for fiscal 2017 is expected to be around $5.1 billion, including the ongoing expansion of the FedEx Ground network and planned aircraft deliveries to support the FedEx Express fleet modernization program. Investments in TNT Express were not included in the forecast.
“I was a little disappointed to see their guidance does not incorporate TNT,” Logan Purk, an analyst with Edward Jones, told Bloomberg in a telephone interview. “The implication is their guidance would come down for the year if it included TNT.”
“Our strong operating cash flow generation allowed us to invest in FedEx’s future this past year,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “We executed on numerous capital projects and completed the acquisition of TNT Express, our largest ever. We were especially pleased with FedEx Express’s continued improvement in operating margin, which was 11.3% in the fourth quarter.”
FedEx reports Q4, FY2016 results in line with expectations
