FedEx profit tops forecasts, helped by online shopping
FedEx shares rose Wednesday as the shipping company said that quarterly profit rose 4%, helped by growth in online shopping and lower costs in its core express-delivery business.
The latest results cover the three months ending Nov. 30, capturing a sliver of the key holiday-shipping period. FedEx has predicted that holiday shipments would rise 12.4% over last year because of the continuing growth in online shopping.
The Memphis, Tennessee-based company reaffirmed its forecast for earnings in the fiscal year that ends in May.
After a much-criticized performance in 2013, FedEx and UPS beefed up holiday-season staffing and performed much better in 2014. For this year, they continued to invest in their ground networks but stood pat on staffing — about 55,000 seasonal workers at FedEx — even though FedEx predicted a 12.4% increase in shipments between Black Friday and Christmas Eve.
Many consumers have come to expect free-shipping promotions, and retailers have made promises that the delivery companies have struggled to keep. On Wednesday, Amazon.com was promoting its Prime service by telling shoppers they could sign up and get free, two-day shipping on orders placed up to Dec. 22 for delivery before Christmas.
“We have experienced extremely heavy ground volumes in the Northeast,” FedEx Chairman and CEO Fred Smith said, adding that Monday was especially busy. But the system “is running as scheduled,” he said on a conference call with analysts.
Logan Purk, an analyst with Edward Jones, said in an interview that the 9% increase in shipments handled by FedEx trucks in the fall quarter indicated that the holiday season could be stronger than expected. He was, however, disappointed that profit margins in the ground-shipping business continued to decline, which he attributed partly to FedEx acquiring low-margin businesses.
FedEx Corp. said net income in its fiscal second quarter was $691 million, up from $663 million a year earlier.
FedEx said it earned $2.58 per share when it excluded the costs of lawsuits by drivers who argue they are employees instead of independent contractors and of buying Dutch delivery firm TNT Express.
That beat Wall Street expectations. Twelve analysts surveyed by Zacks Investment Research had forecast $2.51 per share on average.
Revenue grew 4% to $12.45 billion. Analysts surveyed by Zacks expected $12.4 billion.
Before the report, the shares rose $4.14, or 2.9%, to close at $148.83, a decline of 14% this year. They gained $7.57, or 57%, to $156.40 in extended trading.
