) reported first quarter fiscal 2013 adjusted earnings of $1.45 per
share. The quarter's earnings surpassed the Zacks Consensus
Estimate of $1.40 but missed the year-ago earnings by a penny. The
company's earnings were largely hit by lackluster global economy
that negatively impacted revenue growth.
Total revenues for the first quarter climbed 3% year over year
to $10.79 billion and were above the Zacks Consensus Estimate of
Operating income for the quarter inched up 1% year over year to
$742 million. Operating margin deteriorated 10 basis points (bps)
to 6.9% from 7.0% in the year-ago quarter. Operating expenses rose
2.7% year over year to $10.1 billion.
Quarterly revenues at
were $6.63 billion, up 1% year over year. Operating income was down
28% year over year at $207 million, resulting in an operating
margin of 3.1%, down 130 bps from 4.4% in the year-ago quarter. The
negative impact of lower volumes along with demand shift toward
international services with lower profitability affected the
operating income of the segment.
The FedEx International Priority (IP) average daily package
volume decreased 2.2% for the quarter, while revenue per package
(yield) decreased 3.3% due to unfavorable impact of exchange rate
fluctuations and lower fuel surcharges. The U.S. domestic revenue
per package rose 2% year over year despite a 5% decline in the U.S.
domestic average daily package volume. The revenue growth was
primarily attributable to higher freight rates that offset lower
revenue increased 8% year over year to $2.46 billion, attributable
to volume growth at FedEx Ground. Operating income upped 9% year
over year to $445 million, resulting in operating margin of 18.1%
compared with 17.9% in the year-ago quarter.
FedEx Ground average daily package volume increased 5% driven by
growth in B2B and FedEx Home Delivery services. Revenue per package
grew 2% on increased freight rates. FedEx SmartPost average daily
volume expanded 18% on increased e-commerce and revenue per package
decreased 1% due to higher postal charges.
revenue upped 5% year over year to $1.40 billion, reflecting
increases of 2% in LTL (less-than-truckload) yield and 4% in
average daily LTL shipments. FedEx Freight recorded an operating
income of $90 million that shot up 114% from $42 million in the
Operating margin improved to 6.4% from 3.2% in the year-ago
quarter. The strong performance was driven by higher operational
efficiency alongside volume and yield growth.
revenue fell 5.4% year over year to $389 million in the first
FedEx exited first quarter of fiscal 2013 with cash and cash
equivalents of $2.7 billion compared with $2.8 billion at the end
of fiscal 2012. Long-term debt increased to $2.2 billion compared
with $1.3 billion at the end of fiscal 2012. Capital expenditure
for the first quarter amounted to $972 million compared to $4
billion at the fiscal year-end 2012.
For the second quarter of fiscal 2013, FedEx has projected
earnings per share in the range of$1.30 to $1.45. For fiscal 2013,
the company projects earnings per share in the range of $6.20 to
$6.60, down from the previous forecast of $6.90 to $7.40 per
diluted share. The company maintains its Capital expenditure
estimate of approximately $3.9 billion for fiscal 2013.
In addition, the company announced freight rate increases for
FedEx Express. The rates will increase by approximately 3.9% for
U.S. domestic, U.S. export and U.S. import services, effective
January 7, 2013. The company expects to increase freight rates for
FedEx Ground and FedEx SmartPost pricing for 2013 during the end of
Despite moderate economic growth, we believe FedEx is poised to
benefit from improved pricing, volume growth, continued yield
improvement and diminishing cost headwinds. We expect the strong
performance at FedEx ground and FedEx Freight to continue
supporting earnings growth for the company. However, increased
investments, competitive threats from peers like
United Parcel Service, Inc.
), lower international demand and economic volatilities could limit
the upside potential of the stock
We are currently reiterating our long-term Neutral
recommendation on FedEx. The stock retains a Zacks #3 Rank (Hold)
for the short term (1-3 months).
FEDEX CORP (FDX): Free Stock Analysis Report
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