FedEx reported third quarter earnings ending February 28th, this morning before the market open. The shipping company reported earnings per share of $2.01 on revenue of $11.72 billion. Earnings per share a year ago came in at $1.23 per share, showing over a 53% jump in earnings. Analysts were looking for earnings per share of $1.87 on revenue of $11.79 billion. While FedEx reported very solid earnings, revenue did come under analyst expectations slightly. Shares of FedEx are down -2.18% in premarket trading Wednesday.
“Express” sales slip, overall domestic package volume up 4%
Diving into the quarterly earnings, FedEx saw a slip in “Express” sales, the shipping company’s biggest segment. Express is an expedited shipping option, which would get the shipped item to its destination faster, for a higher fee. Express sales fell to $6.66 billion, down from $6.67 billion last year. On the bright side, FedEx’s ground shipping unit saw revenues increase 12% to $4.49 billion thanks to 7% increase in daily volume, which was mostly due to online sales growth. FedEx’s freight business saw growth of 6% during the third quarter to $1.43 billion, seeing shipments increase 3%. Overall, domestic package volume did see growth of 4% during the quarter. Additionally, while revenue was a miss, FedEx’s margins actually grew as lower fuel costs, restructuring and fair weather helped cut costs during the quarter.
FedEx cuts fiscal year earnings per share outlook
Despite some encouraging factors from its third quarter earnings, FedEx cut its fiscal year earnings outlook from $8.50-$9 to $8.80-$8.95. Analysts have an average full fiscal earnings estimate of $8.97 per share. Management said that they are bringing back incentive compensation this year, which could eat into earnings. Additionally, a very strong US Dollar will cut into international shipping sales, which will certainly impact earnings.
Overall, FedEx had some positive and negative aspects from its third quarter earnings release. Earnings growth for the quarter was positive and overall package volume growth was a good sign. However, the sales hit to the company’s most profitable segment, Express, earnings outlook reduction, and revenue miss will weigh on the results and the stock today.