FedEx reports strong fiscal fourth-quarter, full-year profits

FedEx 777F. Photo: By Rob Finlayson.

As FedEx predicted following the end of its fiscal third quarter (ATW Daily News, March 18), the company posted a strong financial performance for its fiscal fourth quarter ended May 31. Net income jumped 33% to $558 million from a $419 million profit in the prior-year period and quarterly revenue rose 12% year-over-year to $10.55 billion.

With the strong finish, FedEx reported net income of $1.45 billion for FY2010-11ended May 31, up 23% from a FY2009-10 profit of $1.18 billion. The company, regarded as a strong economic indicator, provided very positive guidance for FY2011-12.

"During [FY2010-11], an improved economy, strong customer demand and decisive actions to grow our business led to increased volumes and yields across all transportation segments," said FedEx Chairman, President and CEO Frederick Smith. "With this positive momentum, moderate economic growth and subsiding cost headwinds, FedEx is well positioned to deliver strong earnings growth in fiscal 2012."

The FedEx Express airline unit earned operating income of $429 million in the fiscal fourth quarter, up 4% from a $413 million operating profit in the prior-year quarter. The unit's revenue rose 13% to $6.63 billion; its operating margin, though, was 6.5%, down from 7% in the year-ago quarter. FedEx said International Priority average daily package volume increased 6%, led by exports from Asia. Operating income improvements at the unit were driven by strong yield growth, particularly in US domestic package services, and by volume growth in IP package and freight services.

FedEx said full-year FY2010-11 revenue grew 13% to $39.3 billion while operating income rose 19% to $2.38 billion from $2 billion last year.

FedEx said its positive outlook is based on fuel prices remaining relatively stable and continued moderate growth in the global economy. The company forecast capital spending in FY2011-12 at $4.2 billion, up from $3.4 billion in the prior fiscal year. The expenditures include the delivery of aircraft as well as progress payments toward future aircraft deliveries and other investments in facilities, vehicles and information technology. "Even with higher planned capital spending in [FY2011-12], margins, cash flows and returns are expected to improve year-over-year," said Executive VP and CFO Alan Graf.