FedEx Quarterly Earnings Disappoint, Shares Drop

FedEx Quarterly Earnings DisappointFedEx Corporation (NYSE/FDX) reported disappointing earnings on Wednesday, June 17 after the delivery service giant’s profits were hit by a slower economy and rising fuel costs.

For the fiscal fourth quarter ended May 31, adjusted net income was $753 million, translating to adjusted earnings of $2.66 per share; this is short of Wall Street’s consensus estimate of $2.69 a share. Revenue came in at $12.1 billion for the quarter, missing the $12.3 billion top-line number expected by analysts.

Investors were disappointed about the earnings report. In pre-market trading on Wednesday, shares of FedEx dropped 2.51% to $177.56.

Despite missing expectations, the numbers are slightly better compared to same quarter last year. Sales improved by 2.5% year-over-year and adjusted operating income gained five percent, while adjusted net income stayed the same.

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Note that the adjusted earnings exclude one-time items such as retiring aircrafts and engines. In the reported quarter, the company permanently retired 15 aircraft and 21 related engines. The retirement schedule of an additional 23 aircraft and 57 engines has also been adjusted. These contributed to $276 million in impairment and related charges.

FedEx is optimistic about the outlook for fiscal 2016. The company projects adjusted earnings per share (EPS) to be between $10.60 and $11.10. The projection is based on continuing improvement in base pricing and its profit improvement program.

“Our operating performance significantly improved in fiscal 2015 as we focused on revenue quality and executed on our profit improvement program initiatives,” said FedEx Executive Vice President and Chief Financial Officer Alan Graf Jr. “We expect strong earnings growth in fiscal 2016 as we continue to focus on improving performance and successfully executing our profit improvement initiatives.”

FedEx has been expanding its business. In April 2015, the company announced that it would acquire Dutch package delivery firm TNT Express for 4.4 billion euros ($4.8 billion). This acquisition would increase FedEx’s competitiveness in Europe, challenging incumbents like United Parcel Service, Inc. (NYSE/UPS) and Deutsche Post AG.