Package delivery giant FedEx Corp. (FDX) on Wednesday reported fourth quarter earnings that beat market expectations, as improved results from its ground shipping business helped offset restructuring costs. Revenues matched Wall Street forecasts. FedEx also issued initial earnings growth guidance for the full-year 2013.
The performance of package shipping bellwethers like FedEx and its rival United Parcel Service, Inc. (UPS) are generally considered a strong barometer of overall consumer attitude and business confidence due to the large number of shipments they handle for consumers worldwide.
"FedEx Ground posted another strong year and FedEx Freight margins continued to improve. These positive developments did not fully offset tepid economic growth and customer preference for less costly international shipping services," Chairman, President and CEO Frederick Smith said in a statement.
Smith added that, "FedEx Express results improved in the fourth quarter, and while near-term challenges remain, we are confident we are positioning FedEx for profitable, long-term growth."
The Memphis, Tennessee-based FedEx, a Dow component, reported net income of $303 million or $0.95 per share for the fourth quarter, lower than $550 million or $1.73 per share in the prior-year quarter.
Results for the latest quarter includes a $0.98 per share business realignment program charge and a prior announced $0.20 per share noncash aircraft impairment charge at FedEx Express, while the year-ago quarter includes a $0.26 per share noncash aircraft impairment charge at FedEx Express.
Excluding items, adjusted net income for the quarter was $679 million or $2.13 per share, compared to $634 million or $1.99 per share in the year-ago quarter.
On average, 29 analysts polled by Thomson Reuters expected the company to report earnings of $1.96 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenue for the quarter increased to $11.44 billion from $11.01 billion in the same quarter last year, and matched twenty-two Wall Street analysts' consensus estimate of $11.44 billion.
FedEx Express revenues increased 3 percent to $6.98 billion, FedEx Ground revenues grew 12 percent to $2.78 billion, and FedEx Freight revenues edged up 1 percent to $1.39 billion from last year.
Effective July 1, FedEx Freight will increase U.S. and certain other shipping rates by an average of 4.5 percent. FedEx Express will also further decrease capacity between Asia and the U.S. in July.
Operating margins for the quarter contracted 340 basis points to 4.4 percent from last year's 7.8 percent, while adjusted operating margins improved 60 basis points to 9.6 percent from a year ago.
The company noted that it completed its profit improvement programs that were announced in October 2012, including a voluntary employee separation program that will see about 3,600 employees voluntarily leaving the company in phases. The company incurred hefty charges related to the program in the fourth quarter and fiscal 2013.
For fiscal 2013, the company reported net income of $1.56 billion or $4.91 per share, lower than $2.03 billion or $6.41 per share in the prior year. Excluding items, adjusted net income was $6.23 per share, compared to $6.59 per share a year ago. Analysts expected the company to report earnings of $6.04 per share for fiscal 2013.
Net revenues for the full year grew to $44.29 billion from $42.68 billion in the previous year. Street was looking for full-year 2013 revenues of $44.39 billion.
Looking ahead to fiscal 2014, the company projects earnings per share growth of 7 to 13 percent from fiscal 2013 adjusted results. Street is currently looking for full-year 2014 earnings of $7.36 per share.
The capital spending forecast for fiscal 2014 is likely to be nearly $4 billion.
"We remain focused on improving margins and returns in all of our businesses. The pace of that improvement is expected to be moderate in fiscal 2014 and then accelerate in fiscal 2015," CFO Alan Graf Jr. noted.
FDX closed Tuesday's regular trading session at $99.48, up $0.86 on a volume of 2.20 million shares. In the past 52-week period, the stock has been trading in a range of $83.92 to $109.66.
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