FedEx profits higher than expected, but carrier makes US-Asia cuts
FedEx reported a higher-than-expected quarterly profit yesterday, sending its shares higher, but the world's biggest air freight company said it was cutting more capacity between the US and Asia.
The company, considered an economic bellwether because of the massive volume of goods it moves, is still trying to adjust to increasing demand for cheaper ground transport rather than costlier but faster air shipping.
In particular, the express unit, FedEx's biggest source of revenue, has suffered as more cost-conscious international customers opt to use container ships instead of pricey overnight shipment by air. International priority shipment volumes fell 2pc during the quarter, while international export revenue per package fell 2pc as rates dropped.
The company said earlier this month that it would permanently retire or will speed up the retirement of 86 aircraft and more than 300 engines as it modernises its fleet. It is also increasing rates for its FedEx Freight subsidiary by an average of 4.5pc, effective from July 1.
"Our profit improvement programme is progressing, but we continue to see the effects of customers selecting lower-rate international services," said chief financial officer Alan Graf.
FedEx reported net income of $303m for the fourth quarter up to May 31, compared with $550m a year earlier.
Shares of Memphis-based FedEx were up 3pc in morning trading. Revenue rose 3.6pc to $11.4bn, with FedEx Express revenue up 3pc at $6.98bn.
Revenue for the ground segment, a strong performer, was $2.78bn, up 12pc.
FedEx Ground's average daily volume grew 10pc in the fourth quarter helped by market share gains and growth in e-commerce.
FedEx forecast earnings growth of 7pc to 13pc for its new fiscal year, assuming US gross domestic product growth of 2.3pc, world GDP growth of 2.7pc and the current outlook for fuel prices. (Reuters)