Much attention is made in the financial media and blogosphere on the reported earnings of both FedEx and UPS since they are barometers to trends occurring within global logistics and the broader business economy as a whole.

This week, FedEx released its fiscal fourth quarter and end-of-year earnings and there were some interesting takeaways.  Highlights included:

  • Q4 revenues up 12 percent with operating income up 28 percent year-over-year in the midst of rising aviation and diesel fuel prices. Net income was reported as $558 million, up 33 percent from last year. Total fiscal year revenues increased 13 percent with operating income up 19 percent for the full year.
  • Operating margin increase a full percentage point to 8.4 percent
  • Within the FedEx operating entities, the most significant headline revolved around FedEx Ground whose daily package volume grew by 6 percent in the quarter while operating income was up 31 percent from the year earlier.  This is an indicator that shippers are increasingly turning more to ground vs. air as a preferred method for domestic shipping.
  • Within the FedEx Express segment, international daily package volume increased 6 percent with the company noting exports from Asia (particularly China and India) as a positive trend.
  • The headline for the FedEx Freight segment was accomplishing operating profitability after a series of consolidations and yield management actions.
  • FedEx has also grown overall headcount to slightly more than levels reported in 2008, at the beginning of the global recession, which is an indicator that internal productivity and cost control measures are having a positive impact. The company indicates that it will invest an additional $4.2 billion in fiscal 2012 in facilities, vehicles and IT. We would not be surprised to note that some of these investments would include continuing efforts toward sustainability and carbon reduction efforts.

Regarding the broader global economy, FedEx is basing its forthcoming business plan assumptions on the U.S. economy growing 2.5 percent in 2011, and 3.5 percent in 2012.  Assumptions also factor that the price of oil will average $95 a barrel in the current fiscal year.  Supply Chain Matters believes that these numbers may be a bit too optimistic given recent reports of mounting economic headwinds within China, the U.S., and other emerging economies as well as continued social unrest across the Middle East.

Overall the barometer from FedEx indicates high pressure and sunny skies but certain threats of storms remain in the forecast.

Bob Ferrari