) - the leader in global express delivery services - reported
third-quarter fiscal 2014 results.
Quarterly adjusted earnings of $1.23 per share missed the
Zacks Consensus Estimate of $1.52 and remained flat compared with
the year-ago quarter's adjusted earnings. The company's quarterly
earnings were affected by the harsh winter weather that
eventually brought down volumes and increased cost.
Total revenue for the third quarter was $11.3 billion, 3%
higher than $11 billion in the third quarter of fiscal 2013 but
slightly below the Zacks Consensus Estimate of $11.4 billion.
Operating income was up 9% year over year to $641.0 million in
the third quarter, resulting in an operating margin of 5.7%, up
30 basis points (bps) from 5.4% in the year-ago quarter. The
improvement, aided by the impact of one additional operating day
compared with the year-ago quarter, offset the negative impacts
of the severe winter weather and fuel cost.
Quarterly revenues of
were $6.67 billion, down from $6.70 billion in the year-ago
quarter. The revenue decline was due to lower express freight
revenues and lower fuel charges along with winter calamity.
Operating income was up 14% year over year to $135.0 million
in the third quarter, resulting in an operating margin of 2.0%,
up 20 bps from 1.8% in the year-ago quarter. Apart from one
additional operating day, the improvement was also aided by
higher base package yields, reduced pension expense and ongoing
cost reduction activities.
The FedEx International Priority average daily package volume
decreased 5% year over year and revenue per package (yield)
revenues increased 10% year over year to $3.03 billion in the
third quarter. Operating income was up 2% year over year to $477
million due to rise in volume and revenue per package but
operating margin decreased 130 bps to 15.7% owing to cost
FedEx Ground average daily package volume grew 8% year over
year driven by commercial business, business-to-business and
FedEx Home Delivery services. Revenue per package increased 1%
given rate hikes and higher residential surcharges. FedEx
SmartPost average daily volume rose 2% year over year. Revenue
per package increased 3% due to higher rates.
revenues were up 9% year over year to $1.35 billion in the third
quarter, reflecting a rise of 7% in LTL (less-than-truckload)
average daily shipment. Yield was down 2% year over year. The
segment recorded operating income of $29 million, a steep rise
from $4 million in the year-ago quarter, backed by higher
volumes, average weight per shipment, and increased utilization
of rail in the Economy service offering. Operating margin was
2.2%, up 190 bps from the year-ago quarter.
revenues fell to $368 million in the third quarter from $380
million in the year-ago quarter.
FedEx exited the third quarter of fiscal 2014 with cash and
cash equivalents of $3 billion compared with $4.9 billion at the
end of third-quarter fiscal 2013. Long-term debt was $4.7
billion, up from 2.7 billion in the fiscal 2013. Capital
expenditure amounted to $2.5 billion at the end of third
For fourth-quarter 2014, FedEx expects earnings in the range
of $2.25-$2.50 per share. For the full year, the company expects
earnings in the range of $6.55-$6.80 per share. The company's
capital expenditure guidance is lowered to $3.8 billion from the
previous forecast of $4 billion.
We expect FedEx to witness 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 improving 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.
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
Zacks Rank and Other Stocks
Currently, FedEx carries a Zacks Rank #3 (Hold). A
better-ranked stock in this sector is
Avianca Holdings S.A.
), which holds a Zacks Rank #1 (Strong Buy).
AVIANCA HOLDNGS (AVH): 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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