"Revenue and earnings increased significantly in the quarter due to strong FedEx Ground performance, improved FedEx Freight results and the continued success of the company's yield management actions," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer.
FedEx Corp. reported the following consolidated results for the first quarter:
* Revenue of $10.52 billion, up 11% from $9.46 billion the previous year
* Operating income of $737 million, up 17% from $628 million last year
* Operating margin of 7.0%, up from 6.6% the previous year
* Net income of $464 million, up 22% from last year's $380 million
Improved FedEx Ground and FedEx Freight results offset the effect of slowing global economic growth, which especially impacted volume levels and drove lower productivity at FedEx Express. Results also reflect wage increases, higher funding of incentive compensation programs and the reinstatement of full 401(k) company-matching contributions.
FedEx projects earnings to be $1.40 to $1.60 per diluted share in the second quarter and $6.25 to $6.75 per diluted share for fiscal 2012, compared to the company's previous full year forecast of $6.35 to $6.85 per diluted share. This guidance assumes the current market outlook for fuel prices and moderate growth in the global economy. The company reported earnings of $0.89 per diluted share in last year's second quarter, which included charges of $0.27 per diluted share. The capital spending forecast for fiscal 2012 remains $4.2 billion.
"The U.S. and global economy grew at a slower rate than we anticipated during the quarter," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "While FedEx Ground and FedEx Freight achieved improved operating results despite lower than expected growth, the more rapid decline in demand for FedEx Express services, particularly from Asia, outpaced our ability to reduce operating costs. We have slightly reduced our earnings forecast to reflect current business conditions and are aggressively working to adjust our cost structure to match demand levels."
The company plans to begin acquiring FedEx common shares. A total of 5.7 million shares may be repurchased under existing share repurchase authorizations. The repurchases will be subject to market conditions and will be made from time to time either in the open market or through private transactions in accordance with the requirements of the Securities and Exchange Commission. The company's repurchase program may be suspended, discontinued or resumed at any time.
FedEx Express will increase shipping rates by a net average of 3.9% for U.S. domestic, U.S. export and U.S. import services effective January 2, 2012. The full average rate increase of 5.9% will be partially offset by adjusting the fuel price threshold at which the fuel surcharge begins, reducing the fuel surcharge by two percentage points. The FedEx Ground and FedEx SmartPost pricing changes for 2012 will be announced later this year. FedEx Freight implemented a 6.75% general rate increase earlier this month.