FedEx Corp. (FDX, Financial), the package delivery company, delivered on Sept. 17 its first quarter financial results, which surpassed both earnings and revenue compared to the prior year.
The company witnessed higher variable compensation costs during the quarter together with a spike in the wage for certain employees due to the Tax Cuts and Jobs Act. This hampered the company’s year-on-year results by $170 million.
Earnings and revenue
The company’s first quarter earnings were $3.46 per share, falling short of Zacks Consensus Estimate of $3.78 per share. The company’s revenue climbed 11.8% year-on-year to $17.1 billion. Further, the company registered net income of $835 million or $3.10 per share.
More emphasis on ground operation
Due to continued e-commerce growth and the upcoming holiday season, the Memphis-based company has decided to work harder on its ground operations by operating six days a week on a permanent basis. It is also adding 55,000 employees in the holiday season and increasing working hours.
Raj Subramaniam, executive vice president, chief marketing and communications officer at FedEx, commented:
“The rise in demand for e-commerce goes beyond peak. It’s a year-round phenomenon and we are ready to meet that demand ... FedEx Ground has operated six- and seven-day operations during the holidays for several years as e-commerce has grown, and thanks to strategic investments in our network, we are now well-positioned to operate six days a week in the U.S. all year to best serve the rapidly growing demand.”
The company has installed various technologies at FedEx Ground arena, including autonomous, driverless tugs that take care of handling large packages and robotic trailer unloading and yard management systems that inform the control center regarding a trailer’s arrival or departure from a facility. Working six days a week would help the company to maximize its returns on its investment in ground technology and automated sorting facilities.
Guidance
The package delivery company sees its earnings per share for the whole year being in the range of $17.20 to $17.80, which is more than its prior forecast of $17 to $17.60. In fact, the company projects its fiscal 2018 revenue will grow 9%. FedEx’s CEO, Fred Smith, commented:
“We are very optimistic about our prospects for profitable growth and remain confident we will reach our goal to improve FedEx Express operating income by $1.2 billion to $1.5 billion in fiscal 2020 vs. fiscal 2017,”
Disclosure: I do not hold any position in the stock mentioned in this article.
