FedEx releases strong 2016 numbers, adds to its 767 fleet

FedEx has beaten analysts’ projections for fiscal year 2016, posting a 7.4 percent fourth-quarter rise in revenues to US$13 billion. The latest numbers round out the year’s revenue total to $50.4 billion, an increase of almost $3 billion over FY2015, and an adjusted net income of $3.02 billion, compared to the $2.57 billion figure from the previous year

Fourth quarter revenues were bolstered by two extra operating days, increased profits at FedEx Express, a rise in e-commerce and the impact of fuel price declines, according to the release. FedEx also improved its operating income margin for the final quarter by 2.4 percentage points to 11.7 percent. This margin puts it well above the pre-tax industry average of 5.4 percent for 1Q2016, according to CSIMarket. The worlds largest cargo airline also announced days earlier that it is buying six 767 freighters valued at $1.2 billion, as part of an ongoing modernization of its fleet.

By segment, express generated the most revenue and increased its operating income by 135 percent from $322 million to $753 million, year-over-year. Revenue however, was mostly flat, increasing $20 million to $6.72 billion. The operating margin was up 6.5 points, to 11.3 percent, while the operating income rose 27 percent to $757 million.

FedEx’s ground segment also posted strong numbers, with revenue up 20 percent $4.29 billion. The financial release accredited the developments to “a 10 percent increase in FedEx Ground volume and a 7 percent improvement in revenue per package, driven by the recording of FedEx SmartPost revenues on a gross basis versus the previous net treatment.” Operating income grew by 9 percent due to higher volumes and increased revenue per package as well as benefiting from an additional operating day.

The freight segment was the weakest performer, posting a revenue increase of 2 percent, up to $1.61 billion. Operating income was flat, holding at $137 million y-o-y. That said, FedEx noted that revenue did increase as “less-than-truckload (LTL) average daily shipment growth of 8 percent and the benefit from an additional operating day more than offset the impact from lower fuel surcharges and weight per shipment.”

Perhaps the biggest piece of news this year, the acquisition of TNT that was finalized May 25, was not factored into the above numbers due to its proximity to the end of the fiscal year. The filing does note that, “given the timing and complexity of the TNT Express acquisition, the presentation of TNT Express in our financial statements, including the allocation of the purchase price, is preliminary and will likely change in future periods, perhaps significantly.” So while there have been significant costs to FedEx, the report treats TNT Express’s operating results as immaterial from the time of acquisition.