Tags: FedEx | strong | growth | FDX

FedEx: Strong Growth in a Stagnant Economy

By    |   Thursday, 22 Dec 2011 02:56 PM

The financial results from FedEx (FDX) have typically reflected economic conditions in both the United States and globally. Slow economic growth would result in flat or negative earnings results for the company. However, for the start of FedEx's 2012 fiscal year the company has reported strong growth, in spite of a stagnant economy.

FedEx divides its business into the segments of FedEx Express, traditional worldwide rapid small package delivery; FedEx Ground, home delivery by independent contractors and SmartPost; FedEx Freight for less-than-truckload long haul services; and FedEx Services, the company's storefront operations. The company measures success by the operating margins of the different divisions compared to previous periods.

For the first half of the 2012 fiscal year through Nov. 30, FedEx reported revenue of $13.3 billion, up 11 percent from $11.9 billion in the first half of fiscal 2011. Net income for the half year was $3.02 per share, up 44 percent from $2.08.

In the second quarter earnings release, FedEx management gave earnings guidance for the full year of $6.25 to $6.75 per share. The 2011 earnings were $4.90 per share.

Driving growth

For the first half of fiscal 2012, the bulk of earnings growth came from FedEx Ground. The divisions reported 38 percent higher operating income, while FedEx Express was flat and FedEx Ground swung from a small loss to a small profit. Operating margin for FedEx Ground is the highest of the segments and increased to 17 percent in the second quarter from 14.3 percent the previous year.

The second quarter earnings release also included the announcement of an order for 27 new Boeing 767 aircraft to replace the company's very old MD-10s, used in domestic operations. The new jets will start to arrive in fiscal 2014, resulting in significantly lower expenses in the longer term investment picture.

Urs Dur, senior analyst at Lazard Capital Markets, recently singled out FedEx as the company with the best prospects in the shipping sector, noting its wide international services plus ability to profit from the growing trends in retail e-commerce.

The company next reports on March 17.

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The financial results from FedEx (FDX) have typically reflected economic conditions in both the United States and globally. Slow economic growth would result in flat or negative earnings results for the company. However, for the start of FedEx's 2012 fiscal year the company...
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Thursday, 22 Dec 2011 02:56 PM
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