FedEx Q2 Profit Up, But Misses Estimates; Raises FY Earnings Growth Outlook

(RTTNews) - Package delivery giant FedEx Corp. (FDX) Wednesday reported 14 percent increase in second-quarter profit, reflecting rise in revenues and improved margins. However, the company's earnings per share, as well as revenues missed analysts' expectations.

FedEx Express segment reported significant year-over-year improvement in earnings during the quarter. The firm also raised its adjusted earnings per share growth outlook for fiscal 2014.

Frederick Smith, chairman, president and chief executive officer of the company said, "FedEx posted solid second-quarter earnings, reflecting improved performance at FedEx Express, as the profit improvement plan introduced more than a year ago continues to gain momentum."

FedEx Express segment reported operating income of $326 million, up 42 percent from last year, with operating margin of 4.8 percent, compared to 3.4 percent in the preceding year. Revenues were $6.84 billion, down slightly from last year's $6.86 billion, reflecting lower express freight revenue and lower fuel surcharges.

The Memphis, Tennessee-based company's net income for the quarter ended November 30, 2013 increased to $500 million or $1.57 per share from $438 million or $1.39 per share in the previous year.

On average, 28 analysts polled by Thomson Reuters expected the company to earn $1.64 per share for the quarter. Analysts' estimates typically exclude special items.

The company said its prior-year results were impacted by $0.11 per share due to effects of Superstorm Sandy.

Revenues for the quarter increased 3 percent to $11.4 billion from $11.1 billion in the same quarter last year. Twenty analysts estimated revenues of $11.43 billion for the quarter.

Operating margin improved to 7.3 percent from 6.5 percent a year earlier. According to the firm, operating income and margin increased mainly due to yield and cost management at FedEx Express.

Further, the company said its results were also benefited from the favorable comparison to last year's Sandy-impacted results, lower pension expense and a modest benefit from the voluntary employee severance program.

During the second quarter, the company repurchased 7.2 million shares of its common stock, increasing the fiscal 2014 year-to-date purchase total to 10 million shares.

The company stated that its share repurchases for the second quarter had no effect on the quarter's earnings per share, but are expected to improve full-year earnings by $0.04 per share.

For fiscal year ending May 2014, the company now expects earnings per share growth of 8 to 14 percent above last year's adjusted results, compared to its previous outlook range of 7 to 13 percent. Analysts project annual earnings per share of $7.03.

FedEx noted that its outlook reflects share repurchases made to date but does not include any benefit from additional share repurchases. The forecast also assumes the market outlook for fuel prices and continued moderate economic growth.

The capital spending forecast for fiscal 2014 remains $4 billion. FDX closed Tuesday's regular trading session at $139.09 on the NYSE. In the pre-market activity on Wednesday, the shares are down 0.39 percent.