) - the leader in global express delivery services - reported its
fourth-quarter fiscal 2014 results.
Quarterly adjusted earnings of $2.46 per share steered ahead of
the Zacks Consensus Estimate of $2.36 and significantly exceeded
the year-ago adjusted earnings of $2.13 per share. Growth came
primarily on the back of rising volumes and increased operational
efficiencies at the Freight segment, along with volume and yield
expansion at Ground and improved margins at Express.
Total revenue during the fourth quarter grossed $11.8 billion,
higher than $11.4 billion reported in the fourth quarter of fiscal
2013. The top line also beat the Zacks Consensus Estimate of $11.6
For fiscal 2014, the company reported earnings per share of
$6.75 (up 8.3% year over year) on revenues of $45.6 billion (up
2.9% year over year).
Operating income improved 7.3% year over year to $1.18 billion
in the fourth quarter, resulting in an operating margin of 10.0%,
up 40 basis points (bps) from 9.6% in the year-ago quarter.
Operating income for fiscal 2014 climbed 7.5% year over year to
$3.45 billion, representing an operating margin of 7.6%, up 30 bps
from 7.3% in the year-ago quarter.
Quarterly revenues of
were $7.0 billion, up from $6.98 billion in the year-ago quarter.
The upside was attributable to higher package volume and higher
base package yields, diminishing the impacts of one less operating
day, and lower fuel surcharges and express freight
Operating income was up 3% year over year to $475.0 million in
the fourth quarter, resulting in an operating margin of 6.8%, up 20
bps from 6.6% in the year-ago quarter. Operating results were
positively impacted by higher base package yields and volume and
lower pension expenses, offsetting the negative impacts of lower
fuel and freight revenues and one less operating day.
The FedEx International Priority average daily package volume
remained flat year over year while revenue per package (yield)
revenues increased 8% year over year to $3.01 billion in the fourth
quarter. Operating income was up 5% year over year to $586 million
due to rise in volume and revenue per package. However, operating
margin decreased 60 bps to 19.5% owing to cost escalation.
FedEx Ground average daily package volume grew 8% year over year
driven by e-commerce services. Revenue per package increased 2%
given rate hikes and higher residential surcharges offsetting lower
fuel surcharges. FedEx SmartPost average daily volume decreased 8%
year over year. Revenue per package increased 8% due to higher
revenues were up 12% year over year to $1.55 billion in the fourth
quarter, reflecting a rise of 12% in LTL (less-than-truckload)
average daily shipment. Yield was up 1% year over year. The segment
recorded operating income of $122 million, a rise of 51% from $81
million in the year-ago quarter, backed by higher volumes, average
weight per shipment, and increased operational efficiencies.
Operating margin was 7.9%, up 210 bps from the year-ago
revenues fell 1% year over year to $402.0 million in the fourth
FedEx exited fiscal 2014 with cash and cash equivalents of $2.9
billion compared with $4.9 billion at the end of fiscal 2013.
Long-term debt was $4.7 billion, up from $2.7 billion in the fiscal
2013. Capital expenditure amounted to $3.5 billion at the end of
During the fourth quarter, the company bought back 9.9 million
shares, resulting in total repurchase of 36.8 million shares in
fiscal 2014. As of May 31, 2014, the company had repurchase
authorisation of 5.3 million shares.
For fiscal 2015, FedEx estimates earnings in the range of $8.50
to $9.00 per share. Capital spending is expected to be $4.2
Despite a subdued third quarter, FedEx bounced back with
impressive fourth quarter results on the back of significant
operational efficiency along its network and improving profits
across all segments. We expect FedEx to continue witnessing
earnings momentum and enjoy growth from its long-term expansion
opportunities. The company is concentrating on network realignment
to match the current demand level, improving its performance and
gaining competitive advantage over the likes of
United Parcel Service, Inc.
Radiant Logistics, Inc
Nevertheless, the effects of a sluggish economic environment
have clouded the near-term outlook of the company. Further,
competitive threats, legal hassles, unionized workforce and pension
headwinds could limit the upside potential of the stock.
Zacks Rank and Other Stocks
Currently, FedEx carries a Zacks Rank #3 (Hold). A better-ranked
stock in this sector is
Air Transport Services Group, Inc.
), which holds a Zacks Rank #2 (Buy).
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