Tags: FedEx | Profit | Holiday | Sales

FedEx Profit Beats Estimates, Orders 27 Jets

Thursday, 15 Dec 2011 08:26 AM

FedEx Corp. reported a higher-than-expected quarterly profit and is updating its fleet with 27 new fuel-efficient Boeing aircraft to cut costs, driving its shares up more than 5 percent.

The company also said it is deferring delivery of some Boeing freighter aircraft, adjusting for slowing volume out of Asia.

FedEx expects continued moderate economic growth, with trade flows staying volatile, executives told analysts on a conference call after the company reported results on Thursday.

The Boeing purchase is a cost-effective move to handle medium-haul domestic to intercontinental routes, Sterne Agee Managing Director Jeffrey Kauffman said. "This is the right thing, they're gauging back their asset growth," he said, referring to the deferral of delivery of some aircraft.

FedEx delivered about 17 million packages on December 12, its busiest day in its 40-year history and twice the average daily shipments, driven by online holiday orders.

The world's No. 2 package delivery company reported fiscal second-quarter net profit of $497 million, or $1.57 per share, up from $283 million, or 89 cents per share, a year ago.

Analysts had been expecting a profit of $1.52 a share.

FedEx also affirmed its fiscal 2012 guidance for $6.25 to $6.75 per share, after trimming it in September on tepid global economic growth and high fuel costs.

"Our improved performance was largely a result of effective yield management programs and strong demand for FedEx Home Delivery and FedEx SmartPost services," FedEx Chief Executive Officer Frederick Smith said. "With the healthy growth in online shopping this holiday season, demand is increasing for these residential delivery services."

Revenue rose 10 percent to $10.59 billion. Analysts, on average, expected revenue would rise to $10.61 billion, according to Thomson Reuters I/B/E/S.

The massive volume of goods moved by FedEx make its shipping trends a bellwether of consumer demand and the economic climate.

The value of packages that it handles in its trucks and planes each is equivalent to about 4 percent of U.S. gross domestic product and 1.5 percent of global GDP.

FedEx Express has signed an agreement with Boeing Co (BA.N) to buy 27 new 767-300F aircraft, replacing some that are more than 40 years old.

The company said the 767s will provide similar capacity as the MD10s being retired, with about 30 percent more fuel efficiency and a minimum 20 percent reduction in unit operating costs.

Three of the planes will arrive in fiscal 2014, then six per year between 2015 to 2018.

FedEx Express is also delaying the delivery of 11 777F aircraft, reducing capital spending and adjusting to slowing volumes out of Asia.

"FedEx Express took action during the quarter to adjust its network, particularly in Asia, as recent inventory destocking trends have impacted demand for our FedEx Express services," said Alan Graf, FedEx chief financial officer.

FedEx share were up 5.1 percent in midmorning trading at $81.23. The shares are down about 13 percent this year, lagging the 5 percent drop in the Dow Jones transportation average .DJT, but up 27 percent from this year's lows in October.

Shares of larger rival United Parcel Service (UPS.N) were up 1.3 percent at $71.52 on Thursday.

FedEx and UPS are among transportation companies that have been able to pass through higher rates to customers, despite an uneven economic recovery. Hit by recession, shippers have been keeping inventories lean and depending on just-in-time deliveries that companies like FedEx and UPS make.

FedEx this month said it will raise rates for FedEx Ground and FedEx Home Delivery in 2012 by a net 4.9 percent, on average, matching its 2011 increase. In September, FedEx Freight began a 6.75 percent general rate increase.

© 2017 Thomson/Reuters. All rights reserved.

 
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FedEx Corp. reported a higher-than-expected quarterly profit and is updating its fleet with 27 new fuel-efficient Boeing aircraft to cut costs, driving its shares up more than 5 percent. The company also said it is deferring delivery of some Boeing freighter aircraft,...
FedEx,Profit,Holiday,Sales
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2011-26-15
Thursday, 15 Dec 2011 08:26 AM
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