For the third quarter of fiscal 2022, the courier company posted total revenue of $23.6 billion, a 10% year-over-year gain. The adjusted operating margin was 6.2% and adjusted net income of $1.2 billion was up 30% over the previous year. The adjusted diluted earnings were $4.59 per share, a gain of 32%.
The stock just after noon on Friday was hovering around $215.64, down around 5.30%.
“The continued execution of our strategies drove improved third quarter results,” Chairman and CEO Frederick W. Smith said. “I am proud of our team members around the world, who are constantly proving their resilience amidst a rapidly evolving global environment. FedEx is supporting our team members and others affected by the ongoing conflict in Ukraine as we hope to soon see a return to peace.”
Third-quarter operating income improved due to higher revenue per shipment and a net fuel benefit at all transportation segments. The company also benefited from lower variable compensation expense and less severe winter weather, resulting in favorable year-over-year comparisons. The improved results were partially offset by the effects of the Omicron variant, as well as higher purchased transportation costs and wage rates.
“We successfully executed during the holiday peak season, resulting in record December operating income,” Michael C. Lenz, executive vice president and chief financial officer, said. “Our strong quarterly operating income increase was dampened by the surge of the Omicron variant which caused disruptions to our networks and diminished customer demand in January and into February. We remain focused on revenue quality and operational efficiency initiatives to mitigate inflationary pressures and drive earnings improvement.”
The net income included a tax benefit of $78 million (29 cents per diluted share) related to revisions of prior-year estimates for actual tax return results. Last year’s net income included discrete tax benefits of $108 million (40 cents per diluted share).
The operating income of FedEx's freight segment nearly tripled, driven by a continued focus on revenue quality and profitable growth. Revenue per shipment increased 19% and average daily shipments grew 2% during the quarter, while the operating margin increased 850 basis points to 15%.
The previously announced accelerated share repurchase program was completed during the quarter. The company noted 6.1 million shares were delivered under the agreement. The decrease in outstanding shares benefited third-quarter results by 6 cents per diluted share. Cash on hand as of Feb. 28 was $6.1 billion.
For the full fiscal year, FedEx expects earnings of $18.60 to $19.60 per share before the accounting adjustment for market-to-market retirement plans, compared to the prior forecast of $18.25 to $19.25.
The company is also antipating that earnings per diluted share should be $20.50 to $21.50 before the accounting adjustement for year-end MTM retirement plans and excluding estimated TNT Express integration expenses, estimated costs associated with business realignment activities and the second-quarter MTM retirement plans accounting adjustments. This is unchanged from the previous forecast.
FedEx also called for an effective tax rate of 22% to 23% prior to the year-end MTM retirement plans accounting adjustment, compared to the previous forecast of 24%, and capital spending of $7.0 billion, down form the prior forecast of $7.2 billion.