FDX
$193.70
Fedex
$.35
.18%
Earnings Details
2nd Quarter November 2016
Tuesday, December 20, 2016 4:15:00 PM
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Summary

Fedex Misses

Fedex (FDX) reported 2nd Quarter November 2016 earnings of $2.80 per share on revenue of $14.9 billion. The consensus earnings estimate was $2.91 per share on revenue of $14.8 billion. The Earnings Whisper number was $2.95 per share. Revenue grew 19.9% on a year-over-year basis.

The company said it continues to expect fiscal 2017 earnings of $11.85 to $12.35 per share, excluding items. The current consensus earnings estimate is $12.13 per share for the year ending May 31, 2017.

FedEx Corp provides a portfolio of transportation, e-commerce and business services. It operates in four business: FedEx Express, FedEx Ground, FedEx Freight and FedEx Services.

Results
Reported Earnings
$2.80
Earnings Whisper
$2.95
Consensus Estimate
$2.91
Reported Revenue
$14.93 Bil
Revenue Estimate
$14.81 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

FedEx Corp. Reports Increased Revenue, Operating Income

FedEx Corp. (FDX) today reported earnings of $2.59 per diluted share ($2.80 per diluted share on an adjusted basis) for the second quarter ended November 30, compared to earnings of $2.44 per diluted share a year ago ($2.58 per diluted share last year on an adjusted basis).

This year’s and last year’s quarterly consolidated earnings have been adjusted for:

Impact per diluted share
Second Quarter
Fiscal 2017
Fiscal 2016
TNT Express integration and Outlook restructuring program costs
$
0.18
$ --
TNT Express intangible asset amortization
0.03
--
FedEx Ground legal matters
--
0.09
TNT Express acquisition expenses
--
0.04

"FedEx increased revenues and operating income despite continued low growth rates in the global economy. We are in the home stretch of our peak shipping season, and our service levels are high, thanks to the outstanding efforts of our hundreds of thousands of team members around the world," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "The integration of TNT Express into our broad portfolio of global business solutions is proceeding smoothly and according to plan."

Second Quarter Results

FedEx Corp. reported the following consolidated results for the second quarter (adjusted measures exclude TNT Express integration and Outlook restructuring program costs and intangible asset amortization expense from this year’s results and expenses related to FedEx Ground legal matters and the TNT Express acquisition from last year’s results):

Fiscal 2017
Fiscal 2016
As Reported
Adjusted
As Reported
Adjusted
(GAAP)
(non-GAAP)
(GAAP)
(non-GAAP)
Revenue
$14.9 billion
$14.9 billion
$12.5 billion
$12.5 billion
Operating income
$1.17 billion
$1.23 billion
$1.14 billion
$1.20 billion
Operating margin
7.8%
8.3%
9.1%
9.6%
Net income
$700 million
$757 million
$691 million
$729 million
Diluted EPS
$2.59
$2.80
$2.44
$2.58

Operating income rose compared to last year primarily due to the inclusion of TNT Express and increased base rates and ongoing cost efficiencies at FedEx Express. These factors were partially offset by TNT Express integration and restructuring program costs and intangible asset amortization, and lower operating income at FedEx Ground and FedEx Freight.

A gain from the sale of an investment benefited the quarter’s results by $0.08 per diluted share. In addition, the adoption of a new accounting standard related to share-based payment transactions benefited the quarter’s results by $0.07 per diluted share.

Earnings Guidance

FedEx is unable to forecast the fiscal 2017 year-end mark-to-market ("MTM") pension accounting adjustments. As a result, the company is unable to provide fiscal 2017 earnings guidance on a GAAP basis.

Before year-end MTM pension accounting adjustments, earnings for fiscal 2017 are now projected to be $10.95 to $11.45 per diluted share. This forecast includes TNT Express results and assumes moderate economic growth. The fiscal 2017 earnings forecast before year-end MTM pension accounting adjustments and excluding TNT Express integration and Outlook restructuring program costs and intangible asset amortization remains $11.85 to $12.35 per diluted share. The capital spending forecast for the fiscal year, which includes TNT Express, remains $5.6 billion.

"We are on track to achieve our fiscal 2017 earnings forecast, as we continue long-term investments in our networks," said Alan B. Graf, FedEx Corp. executive vice president and chief financial officer. "While these network projects are impacting FedEx Ground’s near-term profitability, the investments will expand capacity, improve service and enhance long-term returns and cash flows."

Executive Appointments

The Board of Directors of FedEx Corporation has approved the elections of Donald F. Colleran as Executive Vice President, Chief Sales Officer, and Rajesh Subramaniam as Executive Vice President, Chief Marketing and Communications Officer, effective January 1, 2017. Messrs. Colleran and Subramaniam also will become members of the FedEx Strategic Management Committee on that date.

FedEx Express Segment

For the second quarter, the FedEx Express segment reported (adjusted measures exclude TNT Express integration costs):

Fiscal 2017
Fiscal 2016
As Reported
Adjusted
As Reported
(GAAP)
(non-GAAP)
(GAAP)
Revenue
$6.74 billion
$6.74 billion
$6.59 billion
Operating income
$636 million
$654 million
$622 million
Operating income YOY change %
2%
5%
Operating margin
9.4%
9.7%
9.4%

Revenue increased 2% due to increased base rates and higher package volume. U.S. domestic revenue per package increased 3% and U.S. freight revenue per pound increased 6%, both due to higher base rates. International export revenue per package increased 1% as higher base rates were partially offset by unfavorable currency exchange rates and lower fuel surcharges. International export average daily volume grew 2%, driven by growth in both FedEx International Priority(R) and FedEx International Economy(R).

Operating results improved due to increased base rates and ongoing cost efficiencies. As-reported results include $18 million of TNT Express integration expenses. Fuel and currency exchange rates had a minimal impact on the quarter’s results.

TNT Express Segment

For the second quarter, the TNT Express segment reported (adjusted measures exclude TNT Express integration and Outlook restructuring program costs and intangible asset amortization expense):

Fiscal 2017
As Reported
Adjusted
(GAAP)
(non-GAAP)
Revenue
$1.90 billion
$1.90 billion
Operating income
$70 million
$90 million
Operating margin
3.7%
4.7%

As-reported results include $10 million of intangible asset amortization expense and $10 million of integration and Outlook restructuring program costs.

FedEx Ground Segment

For the second quarter, the FedEx Ground segment reported:

Fiscal 2017
Fiscal 2016
Change
Revenue
$4.42 billion
$4.05 billion
9%
Operating income
$465 million
$526 million
(12%)
Operating margin
10.5%
13.0%
(2.5 pts)

Revenue increased due to higher volume and yields. FedEx Ground average daily volume grew 5% in the second quarter, driven by e-commerce and commercial package growth. FedEx Ground yield increased 4% due to higher base rates.

Operating results decreased due to higher rent, depreciation and staffing as a result of network expansion, and increased purchased transportation rates.

FedEx Freight Segment

For the second quarter, the FedEx Freight segment reported:

Fiscal 2017
Fiscal 2016
Change
Revenue
$1.60 billion
$1.55 billion
3%
Operating income
$88 million
$101 million
(13%)
Operating margin
5.5%
6.5%
(1.0 pts)

Revenue increased 3% due to growth in less-than-truckload average daily shipments, partially offset by lower weight per shipment.

Operating results decreased due to the impact from lower average weight per shipment and higher information technology expenses.

Corporate Overview

FedEx Corp. (FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenues of $58 billion, the company offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world’s most admired and trusted employers, FedEx inspires its more than 400,000 team members to remain "absolutely, positively" focused on safety, the highest ethical and professional standards and the needs of their customers and communities. To learn more about how FedEx connects people and possibilities around the world, please visit about.fedex.com.

Additional information and operating data are contained in the company’s annual report, Form 10-K, Form 10-Qs, Form 8-Ks, Statistical Books and second quarter fiscal 2017 Earnings Presentation. These materials, as well as a webcast of the earnings release conference call to be held at 5:00 p.m. EST on December 20, are available on the company’s website at investors.fedex.com. A replay of the conference call webcast will be posted on our website following the call.

The Investor Relations page of our website, investors.fedex.com, contains a significant amount of information about FedEx, including our Securities and Exchange Commission ("SEC") filings and financial and other information for investors. The information that we post on our Investor Relations website could be deemed to be material information. We encourage investors, the media and others interested in the company to visit this website from time to time, as information is updated and new information is posted.

Certain statements in this press release may be considered forward-looking statements, such as statements relating to management’s views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, economic conditions in the global markets in which we operate, our ability to successfully integrate the businesses and operations of FedEx Express and TNT Express in the expected time frame, our ability to match capacity to shifting volume levels, a significant data breach or other disruption to our technology infrastructure, changes in fuel prices or currency exchange rates, legal challenges or changes related to FedEx Ground’s owner-operators and the drivers providing services on their behalf, new U.S. domestic or international government regulation, our ability to effectively operate, integrate and leverage acquired businesses, disruptions or modifications in service by, or changes in the business of, the U.S. Postal Service, the impact from any terrorist activities or international conflicts and other factors which can be found in FedEx Corp.’s and its subsidiaries’ press releases and FedEx Corp.’s filings with the SEC. Any forward-looking statement speaks only as of the date on which it is made. We do not undertake or assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES TO GAAP FINANCIAL MEASURES

Second Quarter Fiscal 2017 and Fiscal 2016 Results

The company reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP" or "reported"). We have supplemented the reporting of our financial information determined in accordance with GAAP with certain non-GAAP (or "adjusted") financial measures, including our adjusted second quarter fiscal 2017 and 2016 consolidated operating income and margin, net income and earnings per share, and adjusted second quarter fiscal 2017 FedEx Express segment and TNT Express segment operating income and margin. These financial measures have been adjusted to exclude the impact of the following items (as applicable):

-- TNT Express integration and Outlook restructuring program costs;

-- TNT Express intangible asset amortization;

Expenses in connection with the settlement of independent contractor litigation matters involving FedEx Ground; and

-- TNT Express acquisition expenses.

We expect to incur significant expenses over the next few years in connection with our integration of TNT Express and the Outlook restructuring program. We have adjusted the applicable fiscal 2017 second quarter financial measures to exclude these items because we generally would not incur such expenses as part of our continuing operations. The integration expenses are predominantly incremental costs directly associated with the integration of TNT Express, including professional and legal fees, salaries and wages, advertising expenses and travel. Internal salaries and wages are included only to the extent the individuals are assigned full-time to integration activities. The Outlook restructuring program is a TNT Express legacy program that includes various initiatives focused on yield management, improved operational efficiency and productivity and improved customer service.

We will also have recurring intangible asset amortization expenses. The company and TNT Express incurred, and will continue incurring, these expenses solely as a result of the company’s acquisition of TNT Express and the related purchase accounting treatment. We excluded intangible asset amortization from the company’s and the TNT Express segment’s fiscal 2017 second quarter financial results to help investors understand the impact of these expenses on TNT Express’s base business and to facilitate the overall comparability of the company’s consolidated financial results. We will not adjust our financial results for intangible asset amortization beginning in fiscal 2018 because the company’s and the TNT Express segment’s financial results will be comparable year-over-year at that time. Given the timing and complexity of the TNT Express acquisition, the presentation of the TNT Express segment in the company’s financial statements, including the allocation of the purchase price, is preliminary and will likely change in future periods, perhaps significantly, as fair value estimates of the assets acquired and liabilities assumed are refined during the measurement period. We will complete our purchase price allocation no later than the fourth quarter of 2017.

The FedEx Ground legal matters are excluded from our fiscal 2016 second quarter financial measures because they are unrelated to our core operating performance and to assist investors with assessing trends in our underlying businesses.

The TNT Express acquisition expenses are excluded from our fiscal 2016 second quarter financial measures because these items impacted the year-over-year comparability of our financial statements and are not related to our core operating performance.

We believe these adjusted financial measures facilitate analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of, or are unrelated to, the company’s and our business segments’ core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying businesses. These adjustments are consistent with how management views our businesses. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and evaluating the company’s and each business segment’s ongoing performance.

Our non-GAAP measures are intended to supplement and should be read together with, and are not an alternative or substitute for, and should not be considered superior to, our reported financial results. Accordingly, users of our financial statements should not place undue reliance on these non-GAAP financial measures. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. As required by SEC rules, the tables below present a reconciliation of our presented non-GAAP financial measures to the most directly comparable GAAP measures.

Fiscal 2017 Earnings Guidance

Our fiscal 2017 earnings guidance is a non-GAAP financial measure because it excludes the fiscal 2017 year-end MTM pension accounting adjustments, projected fiscal 2017 TNT Express integration and Outlook restructuring program costs, and projected fiscal 2017 TNT Express intangible asset amortization. We have provided this non-GAAP earnings guidance measure for the same reasons that were outlined above for historical non-GAAP measures.

We are unable to predict the amount of the year-end MTM pension accounting adjustments, as they are significantly impacted by changes in interest rates and the financial markets, so such adjustments are not included in our earnings guidance. For this reason, a full reconciliation of our fiscal 2017 earnings guidance to the most directly comparable GAAP measure is impracticable. It is reasonably possible, however, that our fourth quarter fiscal 2017 MTM pension accounting adjustments could have a material impact on our fiscal 2017 consolidated financial results. The last table included below outlines the impact of the items that are excluded from our earnings guidance, other than the year-end MTM pension accounting adjustments.

Second Quarter Fiscal 2017

FedEx Corporation
Dollars in millions, except EPS
Diluted
Operating
Income
Net
Earnings
Income(1)
Margin
Taxes(2)
Income(3)
Per Share
GAAP measure
$ 1,167
7.8 %
$
378
$
700
$
2.59
TNT Express integration and Outlook restructuring program costs(4)
58
0.4 %
8
50
0.18
TNT Express intangible asset amortization
10
0.1 %
3
7
0.03
Non-GAAP measure
$ 1,234
8.3 %
$
389
$
757
$
2.80
FedEx Express Segment
Dollars in millions
Operating
Income
Margin
GAAP measure
$
636
9.4 %
TNT Express integration costs
18
0.3 %
Non-GAAP measure
$
654
9.7 %
TNT Express Segment
Dollars in millions
Operating
Income
Margin
GAAP measure
$
70
3.7 %
TNT Express integration and Outlook restructuring program costs
10
0.5 %
TNT Express intangible asset amortization
10
0.5 %
Non-GAAP measure
$
90
4.7 %

Second Quarter Fiscal 2016

FedEx Corporation
Dollars in millions, except EPS
Diluted
Operating
Income
Net
Earnings
Income(1)
Margin(1)
Taxes(2)
Income(1,3)
Per Share(1)
GAAP measure
$ 1,137
9.1 %
$
364
$
691
$
2.44
FedEx Ground legal matters
41
0.3 %
16
25
0.09
TNT Express acquisition expenses
17
0.1 %
7
12
0.04
Non-GAAP measure
$ 1,196
9.6 %
$
387
$
729
$
2.58

Fiscal 2017 Earnings Guidance

Dollars in millions, except EPS
Adjustments
Diluted Earnings
Per Share
Earnings per diluted share before MTM pension adjustments
$10.95 to $11.45
(non-GAAP)(5)
TNT Express integration and Outlook restructuring program costs
$
250
(63 )
Income tax effect(2)
Net of tax effect
$
187
0.69
TNT Express intangible asset amortization
$
75
(19 )
Income tax effect(2)
Net of tax effect
$
56
0.21
Earnings per diluted share with adjustments(5)
$11.85 to $12.35
Notes:
1 -
Does not sum to total due to rounding.
2 -
Income taxes are based on the company’s approximate statutory tax
rates applicable to each transaction.
3 -
Effect of "Total other (expense) income" on net income amount not
shown.
4 -
These costs were recognized at FedEx Corporate ($30 million), FedEx
Express ($18 million) and TNT Express ($10 million).
5 -
The year-end MTM pension accounting adjustments, which are
impracticable to calculate at this time, are excluded.

The financial section of this release is provided on the company’s website at investors.fedex.com.

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SOURCE: FedEx Corp.

FedEx Corp.
Media Contact:
Jess Bunn, 901-818-7463
or
Investor Contact:
Mickey Foster, 901-818-7468
Home Page: fedex.com