Last week, FedEx Corp. reported what the carrier noted as an outstanding start to its fiscal 2015, which surpassed Wall Street analyst expectations. These positive results were fueled primarily by volume increases in its FedEx Ground and FedEx Freight segments and by reaping the rewards of ongoing consolidation with its express air services.
Highlights of Fiscal Q1 performance included:
- A total revenue increase of 6 percent from the previous year, to $11.7 billion
- A of 24 percent increase in operating income to $987 million
- An 8.5 percent Increase in operating margins
FedEx Ground reported an 8 percent increase in revenues while operating income climbed 13 percent. Most of these improvements appear to be driven by rate increases. FedEx does note that its FedEx SmartPost service experienced an average daily volume decrease of 10 percent “due to the reduction of volume from a major customer.” Industry speculation points to Amazon as being that customer. Despite that setback, average daily package volumes for the broader FedEx Ground were up 6 percent, offsetting the SmartPost reductions.
FedEx Freight reported a 13 percent increase in revenues while operating income climbed by 70 percent. The unit experienced an 11 percent increase in less-than-truckload (LTL) average daily shipments.
Supply Chain Matters readers may recall that 18 months ago, FedEx experienced an earnings thud based on radically different international airfreight shipping preferences among shippers. In its fiscal Q1, the FedEx Express unit, bounced back with a 35 percent increase in operating income and a 1.3 point increase in operating margin as a result of ongoing cost containment and re-structuring efforts. In the briefing with analysts, FedEx executives reported that the overhaul of the air fleet, including adjusted scheduling and acquisition of more fuel-efficient aircraft has begun to pay dividends. Executives now view the express network as stabilized, but foresee continued challenges given current continued shifts in global trade and production sourcing. As an example, average daily freight pounds for the international airfreight segment dropped a considerable 21 percent from last year, while revenue per freight pound in this same segment increased 8 percent. That is another sign that higher rates and fuel surcharges are buttressing results.