Courier company expects “continued moderate global economic growth" in US this year.
FedEx Corporation (NYSE: FDX) posted a weaker-than-expected outlook for fiscal year 2015 (FY15), as it narrowed its earnings' estimation on lethargic global economic growth expectation. However, the courier company had a strong holiday season, due to which it thrashed Wall Street Journal's estimates.
The Tennessee-based company trimmed its earnings per share (EPS) forecast from $8.5-9, which was announced on January 23, to $8.8-8.95 for the fiscal year ending May 31. Analysts on Wall Street were looking for EPS of $8.98. The company reiterated its capital expenditure guidance for FY15 at $4.2 billion.
FedEx shares plummeted 2.4% to $171.57 before the trading commenced on Wednesday.
In its earnings call today, the company expected economic growth of 3.1% in the US for 2015 and 2016, stating it as “continued moderate global economic growth".
FedEx arch-rival, United Parcel Services Inc. also failed to impress Wall Street with its FY15 outlook last month, citing stronger dollar and increasing pension expenses.
Holiday Season Earnings Upsides And Downsides
The company, which has 90,000 vehicles and over 600 aircraft, benefited from low crude costs, which pulled the fuel expenses by 30.3% year-on-year (YoY ) to $697 million in third quarter of 2015 (3QFY15).
The earnings of the company were also upbeat due to restructuring initiatives, which improved the fuel efficiency of the air fleets. Furthermore, milder weather in the holiday season was like a blessing for FedEx, as the company’s operating earnings were hit by severe winter weather last year, shaving off $125 million.
However, the earnings of the company were hit by currency headwinds and fuel and declining fuel surcharges in the foreign markets.
FedEx earnings jumped 53.44% YoY to $580 million ($2.01 per share) in 3QFY15, compared to $378 ($1.23 per share) in 3QFY14. The company also said that its EPS received a boost of $0.11 due to share buybacks. Revenues of the company mounted 4% YoY to $11.72 billion in the quarter.
The company thrashed the consensus estimates of $1.87 EPS and 11.79 billion revenues.
Segment-wise Performance
FedEx Express Segment, which is the largest segment of the company, saw its revenues decline slightly to $6.67 billion in 3QFY15. However, the margins grew from 2.5% to 5.8% over the year in the quarter and volumes of domestic package mounted 4%.
FedEx Ground Segment’s revenues grew 12% YoY to $3.39 billion during the quarter, as average daily volumes rose 7% due to growth in both business-to-customers (B2C) and business-to-business (B2B). E-commerce growth and higher base rates were key factors for growth in the segment in the 3Q.
Revenues at FedEx Freight Segment climbed 6% YoY to $1.43 billion, as less-than-truckload (LTL) shipments rose 3%.
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