FedEx has reported higher first quarter (Q1) earnings and has increased its outlook for its 2019 fiscal year – assuming that global trade is stable.
The US integrator said operating income improved during Q1, benefitted from higher volumes, increased yields and a favourable net impact of fuel at all transportation segments.
FedEx reported revenue of $17.1 billion in the three months ended 31 August, an 11.8 per cent increase from a year ago and ahead of the $16.9 billion forecasted by analysts.
Reported net profit in Q1 was up about 40 per cent from a year ago to $835 million when it was $596 million.
For the full year, FedEx maintained a forecast for revenue growth of nine per cent from 2018’s $65.5 billion, but as well as reiterating these forecasts assume moderate economic growth, FedEx added these numbers also assume “stability in global trade”.
FedEx chairman and chief executive officer, Frederick W. Smith said: “FedEx delivered higher first-quarter earnings driven by solid execution of our business plan and a strong U.S. economy.
“We are very optimistic about our prospects for profitable growth and remain confident we will reach our goal to improve FedEx Express operating income by $1.2 billion to $1.5 billion in fiscal 2020 versus fiscal 2017.”
How the trade war being waged with China by US President Donald Trump will affect future FedEx results remains to be seen, but trade between the USA and China reportedly accounts for around two per cent of total FedEx revenue, while tariffs implemented so far affect less than 10 per cent of company volume.
In Q1, FedEx has also accelerated the timing of $200 million in annual pay increases this year, following the passage of Trump’s US Tax Cuts and Jobs Act. “We remain committed to increasing earnings, margins, cash flows and returns this year,” said FedEx chief financial officer, Alan Graf.
As for individual business segment FedEx Express registered a 15 per cent improvement to $367 million, FedEx Ground was up 10 per cent to $667 million and there was a seven per cent increase at FedEx Freight to $176 million.
Revenues wise, FedEx Express was up 10 per cent to $9.2 billion, FedEx Ground increased 13 per cent to $4.8 billion, and FedEx Freight was up 18 per cent to $1.9 billion.
