A steady influx of e-commerce shipments on the ground gave FedEx lift in the quarter that ended Nov. 30, despite weakness in global trade and faltering U.S. industrial production.
The second-largest U.S. transportation company increased revenue 5 percent year-over-year to $12.5 billion, gaining almost $1 billion in revenue at FedEx Ground thanks to e-commerce.
FedEx’s net profit also rose 5.5 percent to $729 million, thanks to higher volumes and base rates at FedEx Express and FedEx Ground. FedEx Freight revenue and profit dropped from a year ago, as expenses outstripped revenue that was diluted by lower fuel surcharges.
Beyond doubt, FedEx Ground was the growth engine in FedEx’s second fiscal quarter. FedEx Express revenue dropped 6 percent and FedEx Freight revenue fell 2 percent year-over-year.
FedEx Ground revenue alone rose 20 percent year-over-year. When revenue from GENCO, which FedEx acquired in late 2014, is included, FedEx Ground revenue rose 32 percent to $4.05 billion. Higher ground volume and base rates helped push revenue up by $987 million.
FedEx Ground package volume rose 9 percent from a year ago to 7.6 million packages a day in the quarter, and was up 7 percent over the first six months of FedEx’s fiscal year.
The division’s operating expenses also rose 36 percent, partly thanks to an accounting change involving FedEx SmartPost postal fees, but operating profit rose 13 percent to $526 million.
That change in how FedEx SmartPost revenues are reported helped push up FedEx Ground revenue per package 10 percent. Higher dimensional weight charges also helped.
At global express package and freight division FedEx Express, a double digit drop in international export package revenue helped pull total revenue down 6 percent to $5.2 billion.
U.S. package revenue dropped 1 percent to $2.9 billion, while international package revenue fell 11 percent to 2 billion. International domestic revenue dropped 13 percent to $336 million.
Air express revenue declined despite a 2 percent increase in U.S. overnight package volume and 1 percent increase in total U.S. package volume. International priority package volume dropped 5 percent, but economy package volume rose 3 percent, the company said. Altogether, total package volume worldwide increased 1 percent to 4.3 million packages a day.
The air express operation struggled with lower fuel surcharges and unfavorable currency exchange rates, thanks to the strength of the U.S. dollar against other currencies. Even so, the express division increased its operating profit 26 percent year-over-year to $622 million.
FedEx Freight, the industrial trucking arm of FedEx and the largest U.S. trucking company, reported lower revenue than the previous or year-ago quarters, with revenue falling approximately $40 million from $1.59 billion a year ago to $1.55 billion in this year’s Nov. 30 quarter.
The less-than-truckload carrier had $1.6 billion in revenue in the previous quarter, which ended Aug. 31. The volume of average daily LTL shipments increased 1 percent but revenue per shipment fell 3 percent, as higher base rates failed to offset lower fuel surcharge revenue.
Increases in salaries and employee benefits significantly outpaced lower-than-anticipated freight volumes from September through November, the company said.