Why FedEx Earnings Were Less than Investors Hoped For

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FedEx Corp. (NYSE: FDX) reported fiscal third quarter 2017 results after markets closed Tuesday afternoon. The package delivery service reported adjusted diluted earnings per share (EPS) of $2.07 on revenues of $15 billion. In the same period a year ago, FedEx reported adjusted EPS of $2.51 on revenue of $12.65 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $2.62 and $14.99 billion in revenue.

The company said that operating results were affected by the significantly negative net impact of fuel costs and one fewer operating day at FedEx Express and FedEx Ground, and network expansion at FedEx Ground. These factors were partially offset by the benefits from yield growth at all of the company’s transportation segments.

Not including mark-to-market pension adjustments, FedEx expects adjusted EPS of $10.80 to $11.30 for the full fiscal year, including TNT Express results. Excluding other one-time charges, the company said it expects fiscal year earnings of $11.85 to $12.35 per share. Capital spending is now tabbed at $5.3 billion, down by $300 million attributed to lower spending at FedEx Ground.

CEO Frederick W. Smith said:

Our worldwide FedEx team delivered an outstanding peak season. Even with our highest volumes ever, we achieved record service levels. We are confident our strategic investments to expand our global scope and portfolio of solutions position FedEx for greater long-term profitable growth as we adapt to meet the evolving needs of our customers.

CFO Alan B. Graf, Jr. added:

During the next three years, the benefits of the TNT Express integration, fleet modernization, yield management, e-commerce growth and investments in network capabilities and efficiency will drive significant earnings growth.

The big miss on third-quarter profits is weighing on the shares in after-hours trading. The stock traded down about 3.4% at $185.29 after closing down 0.2% for the regular session at $191.84. The 52-week range is $145.00 to $201.57 and the 12-month consensus price target is $211.14.