FedEx has reported strong fiscal third quarter earnings with the Ground and Freight divisions noting the biggest gains. Overall, revenue was up 4% to $11.7bn and net income up 53% to $580m. According to the company’s press release, the strong operating results were due to volume and base yield growth along with lower fuel expense.
The Express division noted little change in revenue with $6.66bn compared to $6.67bn same quarter previous year. However, the restructuring within the division really paid off as operating income improved by 129% to $384m. US domestic volumes increased by 4%, including a 5% growth in overnight box. International export volumes increased by 1%.
Meanwhile the Ground division apparently enjoyed the Christmas, Valentine’s Day and Chinese New Year celebrations as revenue was up by 12% to $3.39bn and operating income up by 14% to $558m. Volumes increased by 7% and thanks to rate increases and higher dimensional weight charges, revenue per package was up by 3%. Revenue from FedEx’s recent acquisition, Genco, was also included in this division from the date of the acquisition.
Interesting to note, FedEx experienced a similar situation during the Christmas season. According to the President and CEO of FedEx Ground, Henry Maier, the Ground division was busy at the beginning of peak season and at the end but in the middle it was light. Apparently, however, FedEx was able to adapt quicker to these changes than UPS.
Lastly, FedEx Freight noted a 6% increase in revenue to $1.43bn. Operating income continued to improve in this division, up 94% to $68m. Average daily shipments increased by 3%, while revenue per shipment grew by 3% due to higher rates.
Perhaps one of the most interesting parts of the quarterly analyst call was when CEO Fred Smith was asked his thoughts on Uber. Smith reminded everyone on the call, “We were Uber before Uber was there in our Custom Critical”. Calling it an “urban mythology” in which an app somehow changes a business situation, Smith indicated he did not believe Uber would be a major player in the logistics business.
While the “Uber-craze” carries on within the industry, e-commerce is important to FedEx. The company conceded that there is a growing need for alternative delivery points. As such, it is testing lockers in the Dallas-Fort Worth market as well as some in the Memphis market. In addition it is looking at other alternative delivery options.
Heading into the final quarter of the fiscal year, the company anticipates a continuation of improving profitability due to improvements in operations, rate increases and dimensional weight pricing.