Trucking and parcel delivery company FedEx Corp. (NASDAQ: FDX) on Wednesday reported lower quarterly profits, but adjusted earnings were better than expectations.
The Tennessee-based operation had a net income of $507 million, or $1.84 per diluted share, for its fiscal third quarter ending Feb. 29. That compares to net income of $628 million, or $2.18 per diluted share, a year earlier.
Revenue over the same time frame improved 8% to $12.7 billion, as operating income fell 17% from a year ago to $864 million in the most recent quarter.
Adjusted earnings totaled $692 million in the quarter, or $2.51 per diluted share, better than expectations of $2.33 per share, according to consensus forecast from Zacks Investment Research. These figures compare to $586 million, or $2.03 per diluted share, for the 2015 quarter.
According to the company the earnings were adjusted for expenses related to certain legal matters (61 cents per diluted share) and the pending acquisition of TNT Express (6 cents per diluted share).
“Our strong financial performance was driven by increasing demand for our broad portfolio of FedEx business solutions," as well as by the growth in e-commerce, said Frederick W. Smith, FedEx Corp. chairman, president and CEO.
Adjusted operating income for FedEx rose 19% to $1.16 billion year-over-year, attributed primarily “to improved yield management and the continued positive impacts from profit improvement program initiatives at FedEx Express. The net impact of fuel and currency exchange rates also improved results.” These benefits were partially offset by weaker operating results at FedEx Freight and FedEx Ground.
The FedEx Freight segment had quarterly revenue of $1.45 billion, up 1% from last year but operating income fell 16% to $56 million.
“Revenue increased as less-than-truckload average daily shipments increased 7%, mostly offset by lower fuel surcharges and weight per shipment,” the company said. “Operating results declined primarily due to salaries and employee benefits expense outpacing volume growth.”
For the quarter, the company’s FedEx Express segment reported revenue of $6.56 billion, down 1% from last year, while operating income totaled $595 million, up 51%.
The FedEx Ground segment had revenue of $4.41 billion, up 30% from last year, ,while operating income fell to $557 million from $559 million a year ago.
FedEx also narrowed its earnings forecast to $10.70 to $10.90 per diluted share for fiscal 2016 before year-end pension accounting adjustments, compared to the previous forecast of $10.40 to $10.90 per diluted share.
“We now expect our fiscal 2016 adjusted earnings to be up 20% to 22% over last year, as we continue to benefit from our execution of the profit improvement program,” said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer. “Our positive financial momentum should continue into our upcoming fiscal 2017, where we expect solid growth in earnings and cash flow.”
More details are on the FedEx website.