Express, Ground Boost FedEx’s Fourth Quarter Results

by Trefis Team
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FedEx (NYSE: FDX) continued its strong growth and ended fiscal 2017 with record revenues of $15.73 billion in the fourth quarter, an increase of 21% year over year (y-o-y). The company’s revenues were comfortably higher than market estimates of $15.56 billion. The growth in the company’s top line was primarily due to higher shipments and better revenue per package across product categories. In the same period, the company’s bottom line improved at a higher pace than its revenues, and reported earnings of $4.25 per share on adjusted basis, higher than market expectations and the results in the prior year quarter.

For the full year, FedEx reported revenues of $60.4 billion, almost 20% higher than the prior year, and earnings of $12.30 per share on an adjusted basis, 14% higher than the prior year.

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In the fourth quarter, FedEx continued to witness strong revenue growth in its product categories, primarily driven by growth in the e-commerce sector. FedEx Freight and FedEx Express grew a moderate 5.7% and 6.9%, respectively. The company’s acquisition of TNT Express, completed in May 2016, added an additional $1.9 billion to the company’s top line. Excluding the revenues of TNT Express, FedEx’s top line witnessed organic growth of 6%. The company’s operating margin was reported at 10.1%, the highest posted by the company in the last twelve quarters.

FedEx Ground continued its strong performance, largely due to e-commerce growth. In the fourth quarter, FedEx Ground’s revenues increased 9% on a y-o-y basis, primarily due to a 10% rise in FedEx Ground revenues, partially offset by a marginal decline in FedEx Supply Chain’s revenues. The segment’s average daily volume rose 3% y-o-y due to higher e-commerce demand, while the revenue per package increased 7% over the same period.

FedEx continues to make significant investments to improve its facilities, which bodes well for the company’s future. In fiscal 2017, the company’s capital spending of $5.12 billion, an increase of 6% over the same period last year, was focused on expansion and automation of its existing facilities, improving transportation facilities, both ground and air, and integrating TNT Express’ operations into FedEx Express. The company’s capital expenditures as a percentage of revenue were 8.5%, 110 basis points lower than last year.

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On the back of a successful year, the company issued full year fiscal 2018 EPS guidance in the range of $12.45 to $13.25, excluding MTM pension adjustments. Additionally, the company plans to spend $6 billion to improve its existing fleet and upgrade and automate its sorting facilities in the U.S.. Moreover, the company plans to invest in IT services, in order to expedite the integration of TNT Express into its existing facilities.

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