FedEx, the logistics and package delivery giant, doubled its quarterly profit from a year ago, buoyed by demand for its e-commerce services. For the full year, FedEx reported net income of $5.23 billion, or $19.45 a share, on $84 billion in revenue. That compares with net income of $1.29 billion on revenue of $69.2 billion in the previous year.
Fiscal fourth quarter revenue increased 30% to $22.6 billion, and operating profit rose 98% to $6.18 billion. This was primarily due to volume growth and disciplined revenue and portfolio management. These factors were partially offset by costs to support strong demand, increased compensation expenses, and higher labor rates. The company saw total operating expenses increase 23% from the year-ago quarter. FedEx was affected by the labour crunch the US is currently experiencing, as salaries and employee benefits rose 21% y-o-y. Despite this, operating margins improved to 7.4% from 4.5% in the prior comparable period. To combat these rising costs FedEx will spend $7.2 billion in the fiscal year started June to accelerate capacity expansion, modernize its fleet and facilities, and increase the use of automation and e-commerce.
Fiscal fourth quarter adjusted net income jumped to $1.36 billion, or $5.01 per share, from $663 million, or $2.53 per share, a year earlier. Convey data suggests FedEx maintained a 36% market share for more than three months (compared to 28% for UPS). This is in spite of its deliveries being only 71% on time in May, unchanged from the previous month, but much lower when compared with UPS at 89%.
Divisionally, for the fourth quarter, FedEx Express operating income more than doubled year over year, driven by exceptional growth in international export and US domestic package services. Cargo capacity on passenger planes remains limited.
FedEx Ground reported record earnings for the quarter and revenue growth of 27%. This was primarily driven by strong growth in business-to-business shipments and a 14% rise in revenue per package. However the improvement was partially offset by constrained labor availability.
FedEx Freight reported record earnings and operating margin of 16.1% for the quarter, as average daily shipments grew 30% and revenue per shipment increased 6%. Operating results improved primarily due to the continued focus on revenue quality and profitable growth.
FedEx said it was unable to provide an outlook for fiscal 2022 results because it can’t forecast mark-to-market retirement plan accounting adjustments, though it did say it expected continued strong momentum. Before the accounting adjustments and other costs, the company expects full-year earnings of $20.50 to $21.50 a share.
The company’s shares are up nearly 17% so far this year, and have risen about 125% in the past year. By comparison, the S&P 500 Index has increased nearly 14% year-to-date and is up 38% over the past year. Whilst FedEx is a great company it is currently trading at a 25% premium to fair value and is on a PE of 26.37x, which is pricey relative the US market at 19.2x earnings. We instead own Amazon.com in segregated portfolios and the Cratos BCI Worldwide Flexible Fund.