June 18, 2014 3:26 pm

Strong quarter boosts FedEx’s full-year income

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Shares in FedEx, the parcel delivery company, surged in early trading in New York after it published better than expected results for the year to May 31 and announced a bullish forecast for the current financial year.

Full-year net income rose 35 per cent to $2.1bn, while earnings per share rose 37 per cent to $6.75. Excluding the effects of a $496m one-off business realignment charge last year and a $100m impairment charge for declining aircraft values, net income rose 6 per cent and earnings per share rose 8.3 per cent. Analysts had expected earnings of about $6.68.

Fred Smith, chief executive, said an “outstanding” fourth quarter had helped the company to post “solid” results for the year.

“We believe we are well positioned for a strong fiscal 2015,” he added.

The company projected earnings per share for the year to May 31 next year of $8.50 to $9.00.

Alan Graf, chief financial officer, said the company’s results in the current financial year should benefit from base performance improvement and the continuing profit improvement initiatives at the core FedEx Express business.

“Fiscal 2014 was a good year for FedEx and we expect fiscal 2015 to be even better,” Mr Graf said.

The shares rose 4.5 per cent after the New York market opened, to $146.61.

Both FedEx and UPS, its main rival, have struggled over the past two years with a combination of slow trade growth and customers’ shift towards lower-cost deferred air and ground forms of transport, as well as global air freight overcapacity.

Fourth-quarter operating income at FedEx Express rose 3 per cent to $475m compared with last year’s figure, excluding the one-off charges, while revenue rose slightly to $7bn from $6.98bn.

FedEx attributed the improved profits to higher rates per package, increased volumes and lower pension expenses, which more than offset the effect of reduced fuel surcharges and lower revenue from carrying air freight.

FedEx Ground enjoyed fourth-quarter operating income up 5 per cent from last year’s adjusted figure to $586m, on revenue up 8 per cent to $3.01bn.

Compared with last year’s adjusted results, fourth-quarter operating income for FedEx Freight, the company’s freight forwarding business, increased 51 per cent to $122m, on revenue up 12 per cent to $1.55bn.

FedEx has been under pressure from shareholders – including Dan Loeb, the activist investor – to improve results.

Mr Graf said the company remained committed to improving “earnings, cash flows, returns on invested capital and returns to shareholders”.

He pointed to an increase in the quarterly divided from 15 to 20 cents, announced on June 9, as the latest example of its efforts.

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