FedEx posts positive results in fiscal third quarter; ground margins gain

FedEx Corp. reported positive fiscal 2018 third quarter results late yesterday, with improving margins in its "FedEx Ground" ground-delivery operations offsetting somewhat flat results in its core "FedEx Express" air and international segment.

The company's ground parcel unit posted revenue of $5.2 billion, an 11-percent increase from the year-earlier period. The unit's operating margin was 12.1 percent, compared to an 11-percent operating margin in the fiscal 2017 period. Analysts have voiced concerns about margin growth at the unit in the wake of high capital expenditures to build the capabilities needed to handle expected surges in e-commerce shipments in the years ahead.

Jack Atkins, an analyst for the investment firm Stephens Inc., said in a note that FedEx Ground's margins "appear to have turned a corner," and noted that overall the company has moderated its capital spending activity. The company's capital expenditure forecast of $5.8 billion for 2018 is $100 million less than previously projected.

FedEx Express posted revenue of $9.37 billion, a 9-percent increase from the year-earlier period. Operating income dropped to $510 million, from $610 million in the prior-year quarter. Operating margins dropped to 5.4 percent from 7.1 percent. The numbers excluded the costs in both periods for the integration of parcel carrier TNT Express, which FedEx acquired in 2015. The deal closed in 2016.

Revenue at FedEx Freight, the company's less-than-truckload (LTL) unit, rose 14 percent to $1.69 billion. Operating income soared 34 percent, and operating margin rose 0.5 percent, to 3.2 percent. Daily volumes increased 6 percent, while revenue per shipment increased 8 percent.