FedEx Ground in Moon helps to boost parent FedEx Corp.'s quarterly profit
By John D. Oravecz
Published: Wednesday, Sept. 18, 2013, 11:36 a.m.
FedEx Ground in Moon contributed strongly to parent FedEx Corp.'s improved profit, and executives said on Wednesday that the delivery giant is spending heavily to expand the unit's capabilities.
Shares rose $5.57, or 5.0 percent, to $116.25, moving above a 52-week high of $113.34 set on Aug. 26.
FedEx said three-month profit rose 7 percent despite a dip at its largest unit, FedEx Express, and it will raise prices in January.
The company earned $489 million, or $1.53 a share, in the period ended Aug. 31, up from $1.45 a share a year ago. Results beat analysts' forecast of $1.50 per share. Revenue rose 2 percent to $11.02 billion, just above a forecast of $11.0 billion.
“FedEx Ground reported another outstanding quarter as average daily volume grew 11 percent,” CEO Frederick W. Smith told analysts on a conference call.
Chief Financial Officer Alan Graf said FedEx Ground's operating income grew 5 percent compared with last year, despite higher fuel costs and expansion costs. “We want to continue to invest heavily in Ground and continue to do fleet replacement at Express,” Graf said.
FedEx Ground employs nearly 3,000 in the region.
FedEx Express is struggling with a decline in international priority deliveries as customers shift to less-expensive options. FedEx took steps last year to move away from air shipments, including retiring older jets, paring capacity to Asia and eliminating 3,600 jobs through buyouts as part of a $1.7 billion cost-cutting plan.
Henry J. Maier, CEO of FedEx Ground, said 90 percent of the company's capital spending is used to expand the unit's capacity through hubs, building expansions and relocations, material handling and vehicles.
“Clearly, our volume is being driven by e-commerce,” said Maier, who became the unit's chief on June 1. “In the past year, it's grown five to six times the rate of (retail stores). We believe that we are uniquely positioned to compete in the space.”
FedEx Ground's services include home delivery for consumers and FedEx SmartPost, a low-cost option for businesses that want to offer free shipping; the Postal Service delivers the final mile.
Revenue at FedEx Ground was $2.73 billion, up from last year's $2.46 billion. Operating profit was $468 million, up 5 percent from $445 million a year ago. FedEx SmartPost reported average daily volume increased 26 percent.
Revenue at FedEx Express fell slightly to $6.61 billion from last year's $6.63 billion, but operating profit rose 14 percent to $236 million from $207 million a year ago.
“You can understand why customers are trading down,” Graf said. “They get significantly better pricing and lose just a couple of days.”
The company said FedEx Express will raise rates by an average of 3.9 percent on Jan. 6. Prices for ground shipments in 2014 will be announced.
FedEx left unchanged its forecast for the year that ends in May. It expects earnings per share to rise 7 percent to 13 percent, or $6.63 to $7.01. Analysts surveyed by FactSet expect $6.97 per share.
John D. Oravecz is a Trib Total Media staff writer. Reach him at 412-320-7882 or email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Pa. unemployment rate at the lowest since 2008; more workers finding jobs
- Wages have soared in Pittsburgh, but economy appears to have stalled
- Emboldened by Italy move, QVC to expand into France
- Czech Republic cancels nuclear reactor project with Westinghouse
- Heinz offers Pittsburgh workers a buyout if they are unhappy
- Fed chair might push for stronger regulations
- Google files patent for camera embedded in contact lens
- GlaxoSmithKline discloses bribery inquiries
- PPG shareholders vote against proposals; sales, profit see double-digit increases
- Former BP employee settles insider-trading charges
- Facebook feature lets users locate nearby pals