FedEx (FDX) Misses Q2 EPS by 11c; Affirms FY15 Outlook

FedEx (NYSE: FDX) reported Q2 EPS of $2.14, $0.11 worse than the analyst estimate of $2.25. Revenue for the quarter came in at $11.9 billion versus the consensus estimate of $11.98 billion.

FedEx Express Segment

For the second quarter, the FedEx Express segment reported:

• Revenue of $7.02 billion, up 3% from last year’s $6.84 billion

• Operating income of $484 million, up 36% from $357 million a year ago

• Operating margin of 6.9%, up from 5.2% the previous year

Revenue increased due to higher U.S. domestic package volume and international export package base revenue, partially offset by lower fuel surcharges and exchange rates. U.S. domestic package volume grew by 7%, including a 10% increase in U.S. overnight box. U.S. domestic revenue per package declined 2% due to decreased fuel surcharges and lower weight.

FedEx International Economy® volume grew 5%, while FedEx International Priority® volume increased 1%. International export revenue per package was flat, as higher rates were offset by unfavorable currency exchange and lower fuel surcharges.

Operating results improved due primarily to U.S. domestic and international export package revenue growth, cost management related to profit improvement programs, lower pension expense and a slight net benefit from fuel. These improvements were partially offset by the timing of higher aircraft maintenance expense. The year over year increase in aircraft maintenance expense is expected to subside beginning in the fourth fiscal quarter.

FedEx Ground Segment

For the second quarter, the FedEx Ground segment reported:

• Revenue of $3.06 billion, up 8% from last year’s $2.85 billion

• Operating income of $465 million, up 6% from $439 million a year ago

• Operating margin of 15.2%, down from 15.4% the previous year

FedEx Ground average daily volume grew 5% in the second quarter, driven by growth in both business-to-business and FedEx Home Delivery services. Revenue per package increased 3% due to rate increases and higher residential surcharges. FedEx SmartPost average daily volume decreased 4% due to the reduction in volume of a major customer. FedEx SmartPost revenue per package increased 7% due to rate increases and improved customer mix, partially offset by higher postage rates.

Operating income increased due to higher revenue per package and volume, partially offset by higher network expansion costs, as the company continues to heavily invest in the FedEx Ground and FedEx SmartPost businesses.

FedEx Freight Segment

For the second quarter, the FedEx Freight segment reported:

• Revenue of $1.59 billion, up 11% from last year’s $1.43 billion

• Operating income of $112 million, up 35% from $83 million a year ago

• Operating margin of 7.1%, up from 5.8% the previous year

Less-than-truckload (LTL) average daily shipments increased 8%, including a 10% increase in demand for Priority service. LTL revenue per shipment grew 3% due to higher weight per shipment, higher rates and increased fuel surcharges.

Operating results improved due to increased LTL revenue per shipment and higher average daily LTL shipments.

FedEx reaffirmed FY2015 guidance.

For earnings history and earnings-related data on FedEx (FDX) click here.

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