FedEx beats Street forecasts with 1Q profit of $715 million - KAIT Jonesboro, AR - Region 8 News, weather, sports

FedEx beats Street forecasts with 1Q profit of $715 million

By DAVID KOENIG
AP Business Writer

DALLAS (AP) - FedEx is raising prices, boosting earnings and making plans for handling the crush of holiday packages.

Company executives said Tuesday they expect to hire more than 50,000 holiday-season workers after adding 55,000 last year.

They forecast another record holiday shipping season, thanks to continuing growth of online shopping. Peak loads are expected on the last four Mondays before Christmas.

Over the summer, FedEx earned $715 million in the latest quarter, up 3 percent from the year before. The results beat Wall Street expectations.

The results were helped by higher base prices on FedEx express and ground services and higher volume in the ground-shipping business.

"Overall it was a very good quarter," said Logan Purk, an analyst with Edward Jones. "For the most part this business continues to perform very well."

Purk said the growing volume of packages carried on FedEx trucks and planes indicates that consumers are still spending - especially online - and businesses are still shipping.

FedEx Corp. said that based on an outlook for modest economic growth, it expects to earn between $10.85 and $11.35 per share for the year that ends next May including TNT results and between $11.85 and $12.35 per share without them.

Analysts surveyed by FactSet had predicted $12.07 per share.

The Memphis, Tennessee-based company announced this week that it will raise shipping rates on Jan. 2. Express rates for packages sent within, from or to the U.S. will rise an average 3.9 percent. Ground-shipping, home-delivery and freight rates will jump an average of 4.9 percent.

The company will also raise the cost of sending bulky and extremely long packages. And in February it will start adjusting fuel surcharges weekly instead of monthly to respond more quickly to changes in a key cost.

On a conference call with analysts, Chairman and CEO Fred Smith was asked whether the company was doing any research into the use of drones and unmanned trucks.

"We have five separate ... work streams or projects in both aviation and automated vehicles," Smith said. He declined to provide details until they are ready to "make a meaningful difference in the company."

The company's Boeing 777 cargo jets are capable of taking off and landing on their own, Smith said, "but it's very difficult in the foreseeable future to substitute for the well-trained pilot, driver, person."

Smith said automation technology will develop more slowly than many expect because of safety concerns.

In the quarter ended Aug. 31, FedEx earned $2.65 per share, but excluding one-time items such as costs related to its May acquisition of Netherlands-based TNT Express, the company said it would have earned $2.90 per share.

Analysts surveyed by FactSet expected $2.78 per share and revenue of $14.61 billion.

Revenue rose 19 percent to $14.66 billion, mostly because of the addition of TNT.

Revenue jumped 12 percent in FedEx's ground business and 1 percent in the FedEx express segment, but operating income rose 14 percent in both. Freight income grew 2 percent. TNT lost money.

Before the report, the shares rose $1.39 to close at $162.65. In after-hours trading, they were up another $4.40, or 2.7 percent, to $167.05.

Copyright 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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