FedEx Corp. (NYSE: FDX) today reported earnings of $1.23 per diluted share for the third quarter ended February 28, excluding business realignment costs totaling $47 million primarily related to the company’s voluntary buyout program for eligible U.S. officers and managing directors. Including this year’s realignment costs, third quarter earnings were $1.13 per diluted share.
Last year’s third quarter earnings were $1.55 per diluted share, excluding a $0.10 per share reversal of a reserve associated with a legal matter at FedEx Express. Including last year’s reserve reversal, earnings were $1.65 per diluted share.
“The third quarter was very challenging due to continued weakness in international air freight markets, pressure on yields due to industry overcapacity and customers selecting less expensive and slower-transit services,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “In response, beginning April 1, FedEx Express will decrease capacity to and from Asia and will aggressively manage traffic flows to place low yielding traffic in lower-cost networks. We are currently assessing how these actions may allow FedEx Express to retire more of its older, less-efficient aircraft. We remain focused on our strategic cost reduction programs, which are ramping up and on track.”
Third Quarter Results
FedEx Corp. reported the following consolidated results for the third quarter:
• Revenue of $11.0 billion, up 4% from $10.6 billion the previous year
• Operating income of $589 million, down 28% from $813 million last year
• Operating margin of 5.4%, down from 7.7% the previous year
• Net income of $361 million, down 31% from $521 million a year ago
As discussed above, the quarter’s results reflect the decline in profitability at FedEx Express due to the accelerating demand shift toward lower-yielding international services and lower international export yields. The quarter’s results were also negatively impacted by the business realignment costs noted earlier and by fewer operating days in each transportation segment.