FDX
$215.36
Fedex
$.01
.00%
Earnings Details
4th Quarter May 2017
Tuesday, June 20, 2017 4:15:01 PM
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Summary

Fedex Beats

Fedex (FDX) reported 4th Quarter May 2017 earnings of $4.25 per share on revenue of $15.7 billion. The consensus earnings estimate was $3.89 per share on revenue of $15.6 billion. The Earnings Whisper number was $3.90 per share. Revenue grew 21.2% on a year-over-year basis.

The company said it expects fiscal 2018 earnings of $13.20 to $14.00 per share, excluding items. The current consensus earnings estimate is $13.54 per share for the year ending May 31, 2018.

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
$4.25
Earnings Whisper
$3.90
Consensus Estimate
$3.89
Reported Revenue
$15.73 Bil
Revenue Estimate
$15.56 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

FedEx Corp. Reports Record Fourth Quarter and Full-Year Earnings

FedEx Corp. (FDX) today reported earnings of $3.75 per diluted share ($4.25 per diluted share on an adjusted basis) for the fourth quarter ended May 31, compared to a loss of $0.26 per diluted share (earnings of $3.30 per diluted share on an adjusted basis) a year ago.

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

Impact per diluted share
Fourth Quarter
Fiscal 2017
Fiscal 2016
Mark-to-market ("MTM") pension accounting adjustments
($0.02 )
$
3.47
TNT Express integration expenses
0.32
--
FedEx Trade Networks legal matters
0.09
--
TNT Express intangible asset amortization
0.06
--
FedEx Ground legal matters
0.05
0.02
TNT Express expenses and operating results from the date of
--
0.34
acquisition
Tax impact - legal entity restructuring for TNT integration
--
(0.28 )

"Strong fourth quarter results completed a record fiscal 2017," said Frederick W. Smith, FedEx Corp. chairman and chief executive officer. "We enter fiscal 2018 confident FedEx Corp. will continue to deliver outstanding value and opportunities for shareowners, customers, and team members for years to come."

Fourth Quarter Results

FedEx Corp. reported the following consolidated results for the fourth quarter (adjusted measures exclude the items listed above for the applicable fiscal year):

Fiscal 2017
Fiscal 2016
As Reported
Adjusted
As Reported
Adjusted
(GAAP)
(non-GAAP)
(GAAP)
(non-GAAP)
Revenue
$15.7 billion
$15.7 billion
$13.0 billion
$13.0 billion
Operating income (loss)
$1.58 billion
$1.76 billion
($68 million)
$1.51 billion
Operating margin
10.1%
11.2%
(0.5%)
11.7%
Net income (loss)
$1.02 billion
$1.15 billion
($70 million)
$897 million
Diluted EPS
$3.75
$4.25
($0.26)
$3.30

Operating results benefited from higher base rates, increased package volume and the inclusion of TNT Express results. Net income and earnings per share reflect tax benefits of $104 million, or $0.37 per diluted share, related to the implementation of new foreign currency tax regulations, the adoption of a new accounting standard for share-based payments, and certain transactions related to the TNT Express integration.

Full-Year Results

FedEx Corp. reported the following consolidated results for the full year (adjusted measures exclude the items listed above for the applicable fiscal year):

Fiscal 2017
Fiscal 2016
As Reported
Adjusted
As Reported
Adjusted
(GAAP)
(non-GAAP)
(GAAP)
(non-GAAP)
Revenue
$60.3 billion
$60.3 billion
$50.4 billion
$50.4 billion
Operating income
$5.04 billion
$5.48 billion
$3.08 billion
$5.01 billion
Operating margin
8.4%
9.1%
6.1%
10.0%
Net income
$3.00 billion
$3.33 billion
$1.82 billion
$3.02 billion
Diluted EPS
$11.07
$12.30
$6.51
$10.80

Operating results benefited from higher base rates, increased volume, continued cost management at FedEx Express and the inclusion of TNT Express results. Tax benefits from the implementation of new foreign currency tax regulations and the adoption of a new accounting standard for share-based payments also benefited results. These factors were partially offset by TNT Express integration and restructuring expenses and network expansion costs at FedEx Ground.

Capital spending for fiscal 2017 was $5.1 billion, as certain FedEx Ground expansion projects were deferred to fiscal 2018.

For the year, the company acquired 2.96 million shares of FedEx common stock at an average price of $172.13.

Outlook

FedEx is unable to forecast the fiscal 2018 year-end MTM pension accounting adjustments. As a result, the company is unable to provide fiscal 2018 earnings guidance on a GAAP basis.

Before year-end MTM pension accounting adjustments, earnings are projected to be $12.45 to $13.25 per diluted share for fiscal 2018. This forecast assumes moderate economic growth. The earnings forecast before year-end MTM pension accounting adjustments and excluding TNT Express integration expenses, including restructuring charges, is $13.20 to $14.00 per diluted share for fiscal 2018. These forecasts include an estimated $65 million of TNT Express intangible asset amortization expense.

Capital spending for fiscal 2018 is expected to be approximately $5.9 billion, which includes an increase in planned aircraft deliveries to support the FedEx Express fleet modernization program and continued investments in FedEx Ground automation and capacity expansion, including certain projects deferred from fiscal 2017.

"Investments to modernize our aircraft fleet and expand our FedEx Ground capacity are supporting our strong earnings growth," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "We are very optimistic about fiscal 2018 as evidenced by our earnings outlook."

FedEx Express Segment

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

Fiscal 2017
Fiscal 2016
As Reported
Adjusted
As Reported
(GAAP)
(non-GAAP)
(GAAP)
Revenue
$7.18 billion
$7.18 billion
$6.72 billion
Operating income
$863 million
$909 million
$757 million
Operating income YOY change %
14%
20%
Operating margin
12.0%
12.7%
11.3%

Revenue increased 7% primarily due to increased package volume, driven by international export growth of 5%, and higher base rates.

Operating results increased primarily due to higher base rates, increased package volume, a positive net benefit from fuel and the continued benefit of cost management initiatives. As-reported results include $46 million of expenses related to the integration of TNT Express.

TNT Express Segment

For the fourth quarter, the TNT Express segment reported (adjusted measures exclude integration expenses, including restructuring charges, and intangible asset amortization expense):

Fiscal 2017
As Reported
Adjusted
(GAAP)
(non-GAAP)
Revenue
$1.91 billion
$1.91 billion
Operating income
$26 million
$83 million
Operating margin
1.4%
4.4%

The TNT Express as-reported results include $37 million of integration expenses, including restructuring charges, and $20 million of intangible asset amortization expense.

FedEx Ground Segment

For the fourth quarter, the FedEx Ground segment reported:

Fiscal 2017
Fiscal 2016
Change
Revenue
$4.68 billion
$4.29 billion
9%
Operating income
$702 million
$656 million
7%
Operating margin
15.0%
15.3%
(0.3 pts)

Revenue increased due primarily to higher base rates and average daily package volume growth of 3%.

Operating income increased due to higher yields and volume, partially offset by network expansion and staffing costs as well as increased self-insurance reserves.

FedEx Freight Segment

For the fourth quarter, the FedEx Freight segment reported:

Fiscal 2017
Fiscal 2016
Change
Revenue
$1.70 billion
$1.61 billion
6%
Operating income
$133 million
$137 million
(3%)
Operating margin
7.8%
8.5%
(0.7 pts)

Revenue increased due to higher base rates and fuel surcharges. Average daily shipments were flat as the company focuses on improving revenue quality.

Operating results decreased slightly as higher salaries and wages and increased information technology expenses offset the benefit from higher base rates.

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 $60 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 fourth 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. EDT on June 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, changes in fuel prices or currency exchange rates, a significant data breach or other disruption to our technology infrastructure, 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.

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

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
TO GAAP
FINANCIAL MEASURES

Fourth Quarter and Full-Year 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 fourth quarter and adjusted full-year fiscal 2017 and 2016 consolidated operating income and margin, net income and diluted earnings per share, and adjusted fourth quarter and adjusted full-year 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):

Year-end MTM pension accounting adjustments (non-cash) for our defined benefit pension and other postretirement plans;

-- TNT Express integration expenses incurred in fiscal 2017;

Expenses incurred in fiscal 2016 in connection with the settlement of a U.S. Customs and Border Protection matter involving FedEx Trade Networks, net of recognized insurance recovery;

Fiscal 2017 charges related to certain pending U.S. Customs and Border Protection matters involving FedEx Trade Networks;

-- TNT Express intangible asset amortization;

Expenses incurred in fiscal 2016 and 2017 in connection with the settlement of (and certain expected losses relating to) independent contractor litigation matters involving FedEx Ground (net of recognized insurance recovery for fiscal 2016); and

Expenses incurred in fiscal 2016 associated with the acquisition, financing and integration of TNT Express and its operating results from the date of acquisition, net of any tax impact, including the income tax impact of an internal corporate legal entity restructuring to facilitate the integration of FedEx Express and TNT Express that is presented as a separate item herein.

The MTM accounting-related adjustments are excluded from our fourth quarter and full-year fiscal 2017 and 2016 non-GAAP financial measures because these non-cash items are unrelated to our core operating performance.

We expect to incur significant expenses over the next few years in connection with our integration of TNT Express. We have adjusted our fourth quarter and full-year fiscal 2017 financial measures and the FedEx Express segment and TNT Express segment fourth quarter and full-year fiscal 2017 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 integration expenses also include restructuring charges at TNT Express.

The litigation- and legal-related matters are excluded from our fourth quarter and full-year fiscal 2017 and 2016 non-GAAP financial measures, as applicable, because they are unrelated to our core operating performance and to assist investors with assessing trends in our underlying businesses.

We also have recurring intangible asset amortization expenses at TNT Express. 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 our fourth quarter and full-year fiscal 2017 non-GAAP financial results and the TNT Express segment’s fourth quarter and full-year fiscal 2017 non-GAAP 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 financial results will be comparable year-over-year at that time. Beginning in fiscal 2018, we will recast our fiscal 2017 non-GAAP financial results to include TNT Express intangible asset amortization.

The TNT Express expense items, as well as the income tax impact of an internal corporate legal entity restructuring to facilitate the integration of FedEx Express and TNT Express, are excluded from our fourth quarter and full-year fiscal 2016 non-GAAP 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 excluded TNT Express operating results from the date of acquisition from our fourth quarter and full-year fiscal 2016 non-GAAP financial measures because it was acquired on May 25, 2016 (six days before the end of our fiscal year), and its financial results were immaterial from the date of acquisition and not presented as a separate segment.

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 2018 Earnings Guidance

Our fiscal 2018 earnings guidance is a non-GAAP financial measure because it excludes the fiscal 2018 year-end MTM pension accounting adjustments and projected fiscal 2018 TNT Express integration expenses, including restructuring charges at TNT Express. 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 2018 earnings guidance to the most directly comparable GAAP measure is impracticable. It is reasonably possible, however, that our fourth quarter fiscal 2018 MTM pension accounting adjustments could have a material impact on our fiscal 2018 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.

Fourth Quarter Fiscal 2017
FedEx Corporation
Dollars in millions, except EPS
Income
Net
Diluted
Operating
Earnings
Income
Margin
Taxes(1)
Income(2)
Per Share
GAAP measure
$ 1,581
10.1 %
$ 440
$ 1,020
$
3.75
MTM pension accounting adjustments(3)
(24 )
(0.1 %)
(18 )
(6 )
(0.02 )
TNT Express integration expenses(4)
124
0.8 %
37
87
0.32
FedEx Trade Networks legal matters
39
0.2 %
15
24
0.09
TNT Express intangible asset amortization
20
0.1 %
4
16
0.06
FedEx Ground legal matters
22
0.1 %
9
13
0.05
Non-GAAP measure
$ 1,762
11.2 %
$ 487
$ 1,154
$
4.25
FedEx Express Segment
Dollars in millions
Operating
Income
Margin
GAAP measure
$
863
12.0 %
TNT Express integration expenses
46
0.7 %
Non-GAAP measure
$
909
12.7 %
TNT Express Segment
Dollars in millions
Operating
Income
Margin
GAAP measure
$
26
1.4 %
TNT Express integration expenses
37
1.9 %
TNT Express intangible asset amortization
20
1.1 %
Non-GAAP measure
$
83
4.4 %
Full-Year Fiscal 2017
FedEx Corporation
Dollars in millions, except EPS
Income
Net
Diluted
Operating
Earnings
Income
Margin
Taxes(1)
Income(2)
Per Share(5)
GAAP measure
$ 5,037
8.4 %
$ 1,582
$ 2,997
$ 11.07
MTM pension accounting adjustments(3)
(24 )
--
(18 )
(6 )
(0.02 )
TNT Express integration expenses(4)
327
0.5 %
82
245
0.91
TNT Express intangible asset amortization
74
0.1 %
17
57
0.21
FedEx Trade Networks legal matters
39
0.1 %
15
24
0.09
FedEx Ground legal matters
22
--
9
13
0.05
Non-GAAP measure
$ 5,475
9.1 %
$ 1,687
$ 3,330
$ 12.30
FedEx Express Segment
Dollars in millions
Operating
Income
Margin
GAAP measure
$ 2,678
9.8 %
TNT Express integration expenses
117
0.4 %
Non-GAAP measure
$ 2,795
10.2 %
TNT Express Segment
Dollars in millions
Operating
Income
Margin
GAAP measure
$
84
1.1 %
TNT Express integration expenses
89
1.2 %
TNT Express intangible asset amortization
74
1.0 %
Non-GAAP measure
$
247
3.3 %
Fourth Quarter Fiscal 2016
FedEx Corporation
Dollars in millions, except EPS
Income
Net
Diluted
Operating
Earnings
Income(5)
Margin
Taxes(1)
Income(2)
Per Share(5)
GAAP measure
($ 68 )
(0.5 %)
($111 )
($ 70 )
($0.26 )
Tax impact - legal entity restructuring for TNT integration
--
--
76
(76 )
(0.28 )
MTM pension accounting adjustments(3)
1,498
11.6 %
552
946
3.47
TNT expenses and operating results(6)
66
0.5 %
(13 )
91
0.34
FedEx Ground legal matter
11
0.1 %
4
6
0.02
Non-GAAP measure
$
1,506
11.7 %
$
508
$
897
$
3.30
Full-Year Fiscal 2016
FedEx Corporation
Dollars in millions, except EPS
Operating
Income
Net
Diluted
Earnings
Income(5)
Margin(5)
Taxes(1,5)
Income(2)
Per Share
GAAP measure
$
3,077
6.1 %
$
920
$ 1,820
$
6.51
Tax impact - legal entity restructuring for TNT integration
--
--
76
(76 )
(0.27 )
MTM pension accounting adjustments(3)
1,498
3.0 %
552
946
3.39
FedEx Ground legal matters(7)
256
0.5 %
97
158
0.57
TNT expenses and operating results(6)
115
0.2 %
6
125
0.45
FedEx Trade Networks legal matter(7)
69
0.1 %
26
43
0.15
Non-GAAP measure
$
5,014
10.0 %
$ 1,678
$ 3,016
$
10.80
Fiscal 2018 Earnings Guidance
Dollars in millions, except EPS
Adjustments
Diluted Earnings
Per Share
Earnings per diluted share before MTM pension accounting
$12.45 to $13.25
adjustments (non-GAAP)(8)
TNT Express integration expenses
$
275
(71 )
Income tax effect(1)
Net of tax effect
$
204
0.75
Earnings per diluted share with adjustments(8)
$13.20 to $14.00
Notes:
1 -
Income taxes are based on the company’s approximate statutory tax
rates applicable to each transaction.
2 -
Effect of "Total other (expense) income" on net income amount not
shown.
3 -
MTM pension accounting adjustments reflect the year-end noncash
adjustment to the valuation of the company’s defined benefit
pension and other postretirement plans.
4 -
These expenses, including restructuring charges at TNT Express, were
recognized at FedEx Corporate, FedEx Express and TNT Express.
5 -
Does not sum to total due to rounding.
6 -
TNT Express’s operating results are immaterial from the time of
acquisition (May 25, 2016).
7 -
Net of recognized insurance recovery.
8 -
The year-end MTM pension accounting adjustments, which are
impracticable to calculate at this time, are excluded.

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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