FedEx’s first quarter profit jumps 40%
FedEx Corp. said net profit for its fiscal first quarter ended Aug. 31 jumped 40 percent to $475 million from $339 million in the same quarter last year.
The Memphis-based company posted operating income of $784 million, up 34 percent from $584 million a year ago with revenue increasing 11 percent to $8.54 billion from $7.71 billion.
“We remain confident in our ability to achieve solid profitable growth by taking advantage of strong international trade trends, increased demand for fast-cycle logistics and the expansion of online purchasing,” said Frederick W. Smith, FedEx’s chairman, president and chief executive officer. “The global economy is growing at a healthy pace with the U.S. economy growing at a moderate, sustainable rate.”
Revenue for FedEx Express was up 10 percent to $5.64 billion from $5.12 billion. The unit’s operating income soared 64 percent to $467 million from $285 million, with an operating margin of 8.3 percent compared to 5.6 percent in the first quarter 2005.
FedEx Express’ first quarter 2005 operating income was negatively affected by a one-time, non-cash charge of $75 million recorded primarily to adjust the accounting for rent escalation terms in certain facility leases.
During the latest quarter, FedEx Express signed a contract with the U.S. Postal Service to provide domestic air transportation of mail through 2013. The new agreement is expected to generate more than $8 billion in revenue over the life of the seven-year contract, which begins Sept. 25.
FedEx Ground’s operating income in the first quarter increased 6 percent to $157 million from $148 million. Revenue rose 16 percent to $1.42 billion from $1.22 billion.
Operating income at FedEx Freight rose 11 percent to $150 million, compared to $135 million in the comparable year-earlier period. Revenue was $1.01 billion, up 14 percent from the $892 million posted in the same quarter last year.
FedEx said its recent $780 million cash purchase of the
less-than-truckload assets of Watkins Motor Lines is expected to add about $900 million to segment revenue in fiscal 2007, with no material effect on this year’s earnings.
The operations of Watkins Motor Lines and Watkins Canada Express are being rebranded as FedEx National LTL and FedEx Freight Canada, respectively.
FedEx said its outlook for the remainder of the fiscal year is dependent on the ratification of a tentative four-year labor agreement between FedEx Express and the Air Line Pilots Association, due to be voted on in the fiscal second quarter.
If the contract is ratified, the resulting net impact to second quarter and full-year earnings is expected to be approximately 20 cents per diluted share due to signing bonuses and other up-front compensation. FedEx now expects second quarter earnings to be $1.45 to $1.60 per diluted share, and earnings for the year to be $6.30 to $6.65 per diluted share.
Excluding the impact of the upfront pilot compensation, the fiscal 2007 earnings guidance range has been increased 5 cents per share from the company’s initial guidance. The capital spending forecast for fiscal 2007 is up slightly to $3.0 billion.
At close of business Thursday on the New York Stock Exchange, FedEx’s share price was $106, down 1.53 percent from Wednesday’s closing price.