Restructuring Drives FedEx Surprise

FedEx ( FDX) beat Wall Street estimates and posted third-quarter earnings that were 45% higher than the year-ago period, thanks in part to its restructuring program.

On Wednesday, the shipping company announced third-quarter net income of $207 million, or 68 cents a share, which beat the consensus estimate of 67 cents, according to Thompson One Analytics. Those numbers topped the year-ago's quarter's $147 million, or 49 cents a share. In premarket trading, shares of FedEx rose $1.32, or 1.9%, to $69.75.

When the results of the company's ongoing realignment program are included, FedEx said it earned $216 million, or 71 cents a share. The strong results are a reversal from the second quarter, in which the company earned 87 cents a share, missing the analyst estimate of 90 cents.

Fourth-quarter revenue came in at $6.06 billion, up 9% from the year-ago $5.55 billion, driven by strength in International Priority, Freight and Ground shipments.

"Our revenue growth accelerated, reflecting a strengthening worldwide economy and successful execution of our business strategy, highlighted by the strong performance of our FedEx International Priority service," said CFO Alan Graf, Jr. "In addition, substantial cost savings from our business realignment programs at FedEx Express are resulting in meaningful improvement in our Express margins."

Going forward, FedEx said fourth-quarter results would come in between $1.15 and $1.25 a share, which doesn't include the effect of the realignment program but is higher than the 92 cents a share it had in last year's quarter. Analysts expect the company to earn $1.16 a share in the fourth quarter.

For the quarter, FedEx Express revenue came in at $4.4 billion, up 7% from last year, driven by 21% growth in International Priority. Operating margins for Express, which FedEx hopes will reach double digits, came in at 5.3%, up from 3.2% a year ago.

FedEx Ground revenue growth was stronger, coming in at $960 million, up 8% from last year, but operating margins fell to 11.6% in the quarter from 12.3% last year, hurt by operating losses at FedEx's supply chain management unit. FedEx Freight revenue came in at $630 million, up 11% from last year.

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