It seems as though the U.S. west coast port disruption as well as the recent holiday period provided positive benefits for some global carriers. Earlier this week FedEx reported rather rosy fiscal third-quarter financial results reporting a 53 percent surge in earnings as a result of a highly successful holiday shipping season as well as significantly lower fuel costs.
Total reported revenues were up 4 percent to $11.8 billion and operating income nearly doubled from the year-earlier period. Total profit for the quarter increased to $580 million, 53 percent higher than year earlier period.
In briefing analysts, executives pointed to reduced costs as a significant contributor to earnings growth. Higher volumes across all transportation segments and improved yields at FedEx Ground and FedEx Freight were reported as key drivers of operating results.
According to its recent quarterly filing, average per-gallon fuel costs for ground vehicles have dropped from $3.69 per gallon in fiscal Q1 to $2.71 in the latest quarter. Similarly, average FedEx per gallon costs for jet fuel have dropped from $3.08 per gallon in fiscal Q1 to $2.07 per gallon in the latest quarter. A significant restructuring undertaken in the largest segment Air Express division resulted in the buyout of 3600 employees while fleet modernizing and route optimizations contributed to reduced costs.
Further noted was that the January introduction of dimensional pricing has already provided positive financial benefits with average revenue per package increasing 3 percent from the combination of base rate increases and new pricing. One important statistic shared by FedEx CEO Fred Smith was that about 85 percent of shipments from the top three online e-commerce shippers average less than 5 pounds in weight. That, by our lens is another indication of the magnitude of change implied by dimensional pricing on carriers and eventually on online shopping practices.
FedEx’s Freight division nearly doubled operating income from the year earlier period.
Executives additionally forecasted revenue and earnings growth to continue into the fourth quarter of 2015, driven by ongoing improvements in the results of all transportation segments.
So while FedEx impresses Wall Street, is the same perception shared by shippers large and small, as well as industry supply chains?