) - the leader in global express delivery services - reported
first quarter fiscal 2014 results.
Quarterly adjusted earnings of $1.53 per share surpassed the
Zacks Consensus Estimate of $1.49 and improved from the year-ago
adjusted earnings of $1.45. Despite the challenges in the macro
economy, the company delivered strong earnings on the back of
higher revenues at the Ground and Freight segments coupled with
cost control efforts at the Express segment.
Total revenue for the first quarter was $11.0 billion, 2% higher
than $10.8 billion in the first quarter of fiscal 2013 and in
line with the Zacks Consensus Estimate.
Operating income increased 7% year over year to $795 million,
resulting in an operating margin of 7.2%, up 30 basis points. The
growth was driven by significant margin expansion at FedEx
Express. Total operating expense crept up 2% year over year to
$10.2 billion due to higher depreciation and amortization
expenses along with steeper purchased transportation costs.
Quarterly revenues at
were $6.61 billion, down from $6.63 billion in the year-ago
quarter. The revenue decline was due to lower fuel surcharge
revenues and one less operating day than the year-ago quarter.
Operating income was up 14% year over year at $236.0 million in
the first quarter, resulting in an operating margin of 3.6%, up
50 bps from 3.1% in the year-ago quarter. The improvement was
aided by perked-up business in the U.S. market as well as lower
The FedEx International Priority average daily package volume
remained flat year over year and revenue per package (yield)
decreased 3% due to the unfavorable impact of lower rates, fuel
surcharges and increased appetite for lower yielding
revenues increased 11% year over year to $2.73 billion in the
first quarter attributable to volume growth and higher revenue
per package. Operating income was up 5% year over year at $468
million but operating margin decreased 100 bps to 17.1% owing to
the unfavorable impact of fuel.
FedEx Ground average daily package volume expanded 11% year over
year driven by growth in FedEx Home Delivery services and
commercial business. Revenue per package inched up 1%. FedEx
SmartPost average daily volume expanded 26% and revenue per
package decreased 5% because of higher postal rates and lower
fuel surcharges, which dampened the positive impact of rate
revenues were up 2% year over year at $1.42 billion in the first
quarter, reflecting a rise of 1% in LTL (less-than-truckload)
average daily shipment. Yield was also up 1% year over year. The
segment recorded operating income of $91 million, reflecting an
increase of 1% year over year. Operating margin was 6.4%,
unchanged from the year-ago quarter.
revenues fell 4% year over year to $375.0 million in the first
FedEx exited the first quarter of fiscal 2014 with cash and cash
equivalents of $5.10 billion compared with $2.74 billion at the
end of first quarter fiscal 2013. Long-term debt was $2.7
billion, unchanged from the fiscal 2013 level. Capital
expenditure amounted to $572 million compared with $972 million
at the end of the year-ago quarter.
For fiscal 2014, FedEx maintains earnings per share growth
projection at 7% to 13%. The company's capital expenditure
guidance remains unchanged from the previously estimated $4
FedEx provided rate hikes for 2014, which includes 3.9% hike in
shipping rates at FedEx Express for U.S. export and import
services, with effect from Jan 6, 2014. The company stated that
it will provide information on rate hikes at FedEx Ground and
FedEx SmartPost later this year.
We expect FedEx to register earnings momentum and enjoy growth
from its long-term expansion opportunities. The company is
concentrating on network realignment to match the current demand
level and improve its performance.
FedEx also aims to spread its services across the U.S., Canada
and Mexico and capitalize on potential business opportunities in
the NAFTA (North American Free Trade agreement) market for a
competitive advantage over the likes of
United Parcel Service, Inc.
Expeditors International of Washington Inc.
Radiant Logistics, Inc.
EXPEDITORS INTL (EXPD): Free Stock Analysis
FEDEX CORP (FDX): Free Stock Analysis Report
RADIANT LOGIST (RLGT): Free Stock Analysis
UTD PARCEL SRVC (UPS): Free Stock Analysis
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Nevertheless, the effects of a sluggish economic environment have
clouded the near-term outlook of the company. Further,
competitive threats, legal hassles, unionized workforces and
pension headwinds could limit the upside potential of the stock.
Currently, FedEx retains a Zacks Rank #3 (Hold).