Highlights From FedEx's (FDX) Q4 Conference Call, EPS Rose 32% While Revenue Rose 12%

FedEx Corp. (NYSE: FDX) reported Q4 EPS of $1.75, $0.03 better than the analyst estimate of $1.72. Revenue for the quarter came in at $10.6 billion versus the consensus estimate of $10.42 billion.

Highlights from FDX's Q4 conference call:

• FedEx is well positioned for strong earnings in 2012 given positive momentum, moderate economic growth, and diminishing cost headwinds.
• Anticipates near-term softness in the economy will be temporary as fuel prices have retreated from their April highs and the Japanese economy recovers.�
• Forecasts the industrial sector will lead growth in the United States and overseas in the next two years.
• Invested for the future, strengthening networks, improving already high levels of service, growing international business, and restoring benefits to team members.
• Expects higher margin revenue from international operations to approach U.S. domestic revenues at FedEx Express in FY '12 for the first time in our history.
• Remain committed to long-term goals of growing revenue, achieving 10%-plus operating margins, increasing earnings per share significantly, improving cash flows, and increasing returns on invested capital.
• EPS in the fourth quarter surged 32% to $1.75 per share compared to $1.33 last year. Overall revenue grew 12% to $10.6 billion due to continued strong yield improvement in all transportation segments, volume growth of Ground and International Express shipments, and Freight's return to profitability.
• The Express segment, revenue grew 13% to $6.6 billion while operating income increased 4% to $429 million. Operating income improvements were driven by strong yield growth and by 6% growth in IP package shipments and 13% in International Priority and International Economy pounds. U.S. domestic package yields increased 10%, and IP package yields increased 8%.
• Ground segment, revenues climbed 15% to $2.26 billion, while operating income soared 31% to $417 million. Operating margins hit an all-time quarterly record of 18.4%. Revenue per package increased 7%, primarily due to yield management actions. And package volume grew 6%, driven by increases in the business-to-business market and Home Delivery service. SmartPost average daily volume surged 24% due to growth in e-commerce, while yields increased 8%.
• Freight returned to profitability, with operating income of $42 million in the quarter, which was primarily due to the higher LTL yield, which climbed 13% or 9% excluding fuel surcharges. LTL yields have increased sequentially in each of the past four quarters. LTL average daily shipments decreased 8% as a result of.
• End of the year debt was approximately $1.7 billion, while cash on hand was greater than $2.3 billion. This is after capital spending of $3.4 billion and $480 million in contributions to our U.S. pension plans in FY '11.
• Effective tax rate for FY '11 was 35.9% compared to 37.5% in FY '10.
• For FY12 initial earnings guidance of $6.35 to $6.85 per share.
• FedEx Express international services and FedEx Ground services are anticipated to be the primary drivers of growth during 2012. FedEx Freight segment will be profitable throughout the fiscal year.
• At Express, expects strong improvement in operating income and margin.
• At Ground, expects strong operating income growth due to efficiency improvements such as automated operational planning systems and improved transit time across numerous shipping lanes.
• FY '12 capital expenditures will increase to $4.2 billion, nearly 60% of capital spending is designated for growth initiatives.
• Investing in IT infrastructure and technology upgrades across the corporation to improve reliability and efficiency.
• Expects GDP to accelerate through the calendar year. Projections on a Q/Q basis for GDP in the Q2 is 1.9%, Q3 at 3.5%, and Q4 of 3.4%. For calendar '11, anticipating 2.5% GDP growth; and in calendar '12, 3.0% GDP growth, with industrial production around 4.2% – 4.3%.
• In FY '12 is that we are going to take advantage of the Tax Relief Act, and we get to write off 100% or 50% of a lot of these assets.
  

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