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VOL. 42 | NO. 24 | Friday, June 15, 2018

FedEx profit rises on increase in volume, shipping rates

The Associated Press

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Higher rates, tax benefits and steady business fueled by economic growth helped FedEx Corp. boost its fourth-quarter profit 10 percent to $1.13 billion.

Chairman and CEO Fred Smith said Tuesday that he is optimistic that the package-delivery company will increase its earnings and profit margins. On a conference call with analysts, however, he warned against a looming trade war.

"History has shown repeatedly that protectionism is counterproductive to economic growth," Smith said. He said governments should encourage open markets and reduced barriers to trade.

Shares of FedEx slipped 2 percent Tuesday, as industrial and technology stocks skidded in reaction to rising tension over trade between the U.S. and China. FedEx closed at $258.39, then dipped another $1.39 in after-hours trading, to $257.

In the most recent quarter, FedEx saw higher profit at both its express and ground-delivery businesses. The ground division did particularly well, with operating income up 18 percent.

The company cited higher base rates and a boost in shipping volume, partly offset by wage increases for some employees. Officials said their TNT Express acquisition has recovered fully from a cyberattack last year, although not all business has returned.

"The volume story remains on track, and the TNT story is doing well," Logan Purk, an analyst with Edward Jones, said in an interview. "The (fiscal 2019) outlook was a little shy of where I wanted them to be, but I wouldn't call it a stumble."

The Memphis, Tennessee-based company said earnings in the fiscal year that started this month would range between $17 and $17.60 per share, roughly in line with analysts' forecast of $17.48 per share. The outlook assumes that moderate economic growth will boost FedEx revenue by 9 percent — more than analysts foresee.

FedEx said that excluding certain write-downs and costs of folding Dutch delivery firm TNT Express into its own express business, it would have earned $5.91 per share. Analysts were expecting $5.72 per share, according to a survey of 10 analysts by Zacks Investment Research.

Revenue rose 10 percent to $17.31 billion, also topping analysts' forecasts. Nine analysts surveyed by Zacks expected $17.19 billion.

The results included $388 million in tax benefit from corporate restructuring and foreign tax credits.

For the year that ended May 31, the company reported income of $4.57 billion, up from $3.00 billion because of a $1.6 billion gain from the corporate-tax-cut law that Trump signed in December.