July 15, 2024

FedEx Credits Its Cost Controls as Profit Rises 33%, Exceeding Forecasts

The company said it would spend more on technology and fuel-efficient aircraft, helping to increase revenue per package.

“Our actions to improve yields continue to drive revenue and earnings growth across our transportation segments,” FedEx’s chief financial officer, Alan B. Graf Jr., said.

“Even with higher planned capital spending in fiscal 2012, margins, cash flows and returns are expected to improve year over year.”

FedEx, which ranks No. 2 behind United Parcel Service among package shipping companies, has been able to pass through higher costs via fuel surcharges and still has room to raise prices without widespread retaliation from consumers, many analysts said.

“Pricing and expense control” drove FedEx earnings up even as it navigated harsh weather, an economic soft patch and supply chain disruptions caused by Japan’s earthquake, and lofty fuel costs, said Peter Nesvold, a Jefferies Company analyst.

FedEx’s chief executive, Frederick W. Smith, said the combination of rising fuel prices, the devastation in Japan and consumer sentiment contributed to the slowing of the economic recovery. However, he said he expected a turnaround now that crude oil prices were retreating.

FedEx predicted that consumer spending, industrial production and gross domestic product would improve in the second half of 2011. FedEx said its profit rose 33 percent, to $558 million, or $1.75 a share, from $419 million, or $1.33 a share, a year earlier.

Analysts, on average, forecast a profit of $1.72 a share.

FedEx forecast its fiscal 2012 profit rising to $6.35 to $6.85 a share, allowing for oil’s volatility, Mr. Graf said. The midpoint of $6.60 topped analyst forecasts.

Revenue in the period, which ended May 31 and was the fourth quarter of FedEx’s fiscal year, rose 12 percent, to $10.55 billion from $9.43 billion.

FedEx Express and the less expensive ground segments, which account for more than 80 percent of the company’s revenue, had revenue growth of more than 10 percent in the quarter.

Fast-growing e-commerce drove up FedEx’s SmartPost average daily volume 24 percent as revenue per package rose 8 percent. SmartPost involves shipping packages to the United States Postal Service, which in turn delivers to residences.

FedEx’s freight division posted a long-awaited return to profitability after two company segments were combined.

Stock in FedEx, which is based in Memphis, rose $2.31, or 2.6 percent, to $91.44 a share.

Article source: http://feeds.nytimes.com/click.phdo?i=39109eebfd60c250ba4257123b522b30

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