FedEx sees slight dip in profits but no recession

At the presentation of its latest quarterly results FedEx Chairman and CEO Fred Smith commented that he did not expect the world’s economy to enter recession, but rather sluggish growth would continue due to a lack of confidence that policy makers would effectively address current economic challenges.

FedEx Express did see slowing volume growth, particularly in its International Express business, although revenues were pushed higher as a result of higher fuel surcharges and better performance in the FedEx ground and freight businesses.

For the corporation as a whole, revenue increased 11% year-on-year to US$10.52bn whilst operating income was up 17%. Operating margin was up from 6.6% to 7%.

The core FedEx Express business appears to have suffered somewhat from falling volumes, yet higher fuel surcharges drove revenue up 12% year-on-year. Lower utilisation, however, drove operating margin down from 6% to 4.4% and operating income down 12%. Wage related costs also grew in the quarter.

FedEx Ground saw better underlying conditions. Average daily package volumes grew by 5% year-on-year driven both by the B2B and the ‚home delivery‘ segments. Revenue climbed by 16% year-on-year to $2.28bn whilst operating income grew by 42% to $407m. Margins leapt from 14.6% to 17.9%.

FedEx Freight also had a surprisingly good quarter. Revenue was up 6% whilst the business saw an operating income of $42m compared with a loss in the same period last year. What FedEx calls "yield management actions" resulted in a growth in volume of 7%. The improvement of the performance of this previously troubled business is ascribed by FedEx to the "combination of the FedEx Freight and FedEx National LTL operations".

Despite a relatively stable performance in this quarter FedEx struck a note of caution. Unlike UPS it down-graded its profits forecast slightly, although it admitted the role of fuel costs is hard to estimate. Alan Graf, FedEx’s chief financial officer commented that despite better performance in FedEx Ground and FedEx Freight, "…the more rapid decline in demand for FedEx Express services, particularly from Asia, outpaced our ability to reduce operating costs".

Quelle: eyefortransport
Portal: www.logistik-express.com