Package delivery giant FedEx Corp. (FDX) reported Thursday a 22 percent increase in first-quarter profit on the strength of FedEx Ground and FedEx Freight units' performance as well as yield management actions. Quarterly earnings met Street projections, while revenues beat its view. Further, the company trimmed its fiscal 2012 earnings forecast to reflect current challenging business conditions.
First-quarter net income climbed to $464 million or $1.46 per share from prior year's $380 million or $1.20 per share.
On average, 25 analysts polled by Thomson Reuters expected the company to report earnings of $1.46 per share. Analysts' estimates typically exclude special items.
Total revenue grew 11 percent to $10.52 billion from $9.46 billion in the prior-year quarter, while analysts estimated revenues of $10.32 billion.
The company noted that improved FedEx Ground and FedEx Freight results offset the effect of slowing global economic growth, which especially impacted volume levels and drove lower productivity at FedEx Express.
Operating income also climbed 17 percent to $737 million, and operating margin grew to 7 percent from 6.6 percent in the previous year.
Segment-wise, FedEx Express revenues rose 12 percent to $6.59 billion, with growth in revenue per package mainly due to higher fuel surcharges, yield management actions and increased weight per package, despite a drop in average daily package volume.
FedEx Ground segment's revenues grew 16 percent, and FedEx Freight segment posted a 6 percent rise in revenues, while revenues from FedEx Services segment edged down 1 percent.
Alan Graf, Jr., FedEx Chief Financial Officer said, "The U.S. and global economy grew at a slower rate than we anticipated during the quarter. While FedEx Ground and FedEx Freight achieved improved operating results despite lower than expected growth, the more rapid decline in demand for FedEx Express services, particularly from Asia, outpaced our ability to reduce operating costs."
Looking ahead, Smith added, "While the economic environment is challenging, we remain confident FedEx will improve earnings, margins and cash flows this fiscal year."
For the second quarter, FedEx projects earnings to be $1.40 to $1.60 per share, while analysts expect the company to earn $1.58 per share. The company's last year's earnings were $0.89 per share, including charges of $0.27 per share.
The company now expects fiscal 2012 earnings of $6.25 to $6.75 per share, compared to the previous forecast of $6.35 to $6.85 per share. Analysts expect the company to earn $6.40 per share. In the year 2011, earnings were $4.57 per share.
The revision assumes the current market outlook for fuel prices and moderate growth in the global economy, the company said.
While announcing strong growth in fourth quarter earnings in June, FedEx had said its forecast reflects positive momentum, moderate economic growth and subsiding cost headwinds.
Further, FedEx said its Express unit will increase shipping rates by a net average of 3.9 percent for U.S. domestic, U.S. export and U.S. import services effective January 2, 2012.
In pre-market activity, shares are currently at $71.50, down $1 or 1.38 percent.
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