Fedex doubled its net profit in its quarter ending Aug. 31 to $380 million on strong expansion in international express shipping, but the company issued a forecast for slower global economic growth.
The company also said it was merging its FedEx Freight and FedEx National LTL networks at the end of January.
The merger of the trucking units will eliminate 100 facilities, about 20 percent of the units’ total, and 1,700 jobs, about 5 percent of employees. FedEx said the moves, coupled with other steps, will return the trucking division to profitability next year.
By The Numbers: Cass Freight Index.
FedEx said its net income more than doubled to $380 million in its June-August fiscal first quarter as revenue rose 18 percent to $9.46 billion and operating income increased 99 percent to $628 million.
CEO Fred Smith cited improved global economic conditions but offered a cautious outlook about the months ahead.
"We are expecting a phase of somewhat slower growth going forward," Smith said in a call with analysts, though he cited signs of a "solid" U.S. holiday shipping season.
Because of its global presence and sensitivity to economic trends, FedEx is closely watched as a barometer of trade conditions.
The company’s express-shipping segment saw revenue jump 20 percent, with international-priority average daily volume up 19 percent, led by Asian exports. In recent months FedEx has added planes to carry Asia-U.S. shipments of electronics and consumer products. U.S. domestic revenue per package was 7 percent higher while average daily package volume increased 3 percent.
FedEx said it expects to record $150 million to $200 million in charges in the next two quarters from the merger of its FedEx Freight and FedEx National LTL operations.
The company’s trucking unit, struggling with industry-wide overcapacity and weak pricing, had an operating loss of $16 million, compared with an operating profit of $2 million last year, as revenue rose 28 percent to $1.26 billion.
FedEx Ground revenue increased 13 percent as average daily volume rose 7 percent. Freight revenue was up 28 percent while the smaller services segment fell 8 percent.
The world's second-largest package delivery company now expects to earn between $1.15 and $1.35 per share for the quarter ending in November, below analysts' expectations of $1.36 per share.
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