FedEx’s third quarter “below expectations”

FedEx reusable packaging

FedEx showed improvement in revenue and operating income in Q3 FY2019. At $17.0bn, turnover increased 2.9% year-over-year, whilst operating income increased 6.2% to $911m.

However, Frederick W. Smith, FedEx Corp. Chairman and Chief Executive Officer stated that, “third quarter financial results were below our expectations.”

In the FedEx Express segment, revenues fell 1.0% to $9.0bn, due to falls in international sales. International export package revenues fell 3.4% due to slower demand for its premium International Priority service. International domestic package (FedEx’s intra-country operations) revenues fell by 5.4%. Alan B. Graf, Jr., FedEx Corp. Executive Vice President and Chief Financial Officer, commented, “Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in our FedEx Express international revenue.”

Domestic package revenues were stronger, with volumes up 6% in Q3. The FedEx Express segment as a whole saw operating income grow 16.7%, due to lower variable incentive compensation expenses, the favourable net impact of fuel and volume growth, partially offset by lower package yields.

FedEx Ground revenues grew 9.0% to $5,261m. Average daily volume increased 6%, due to strong e-commerce growth. However, operating income fell 6.0%, partly due to higher costs resulting from a move to an all year round 6-day per week operating schedule. In addition, higher purchased transportation from increased contractor settlement rates dampened profitability.

In the FedEx Freight division, revenues grew 8.5% to $1,750m and operating income grew 98.0% to $97m due to higher revenue per shipment and average daily shipments.

Source: FedEx