FedEx Corp. on Thursday, March 22, reported revenue of $10.56 billion for the third quarter ended Feb. 29, up 9 percent from $9.66 billion the previous year; operating income of $813 million, up 107 percent from $393 million last year; an operating margin of 7.7 percent, up from 4.1 percent; and net income of $521 million, up 126 percent from $231 million.
“FedEx Corp. results were driven by improving yields, record holiday package shipping and exceptional performance at FedEx Ground,” said Frederick W. Smith, chairman, president and chief executive officer of the Memphis, Tenn.-based company. “We expect our solid performance to continue in our fourth quarter, capping off a strong fiscal year.”
Operating income improved due to the continued strong performance of FedEx Ground driven by higher yields and volumes, as well as improved results at FedEx Freight. Operating income also reflects the positive year-over-year impact, predominately at FedEx Express, of a benefit from the timing lag that exists between when fuel prices change and when indexed fuel surcharges automatically adjust. The company also benefitted from a lower tax rate and mild winter weather.
For the third quarter, the FedEx Freight segment reported revenue of $1.23 billion, up 10 percent from $1.12 billion; an operating loss of $1 million compared with an operating loss of $110 million; and an operating margin of -0.1 percent, up from -9.8 percent the previous year. Less-than-truckload yield increased 6 percent due to higher LTL fuel surcharges and base yield improvement. LTL average daily shipments increased 2 percent, reflecting sequential improvement during the quarter and favorable comparisons due to severe winter weather in the prior year.
The operating results in the quarter improved significantly as a result of the positive impacts from higher yield and volume, milder winter weather, one additional business day and ongoing improvements in operational efficiencies. In the prior-year quarter, the segment incurred one-time costs of $43 million due to the combination of the FedEx Freight and FedEx National LTL operations on Jan. 30, 2011.
“We are pleased with the improved performance at FedEx Ground and FedEx Freight during our third quarter,” said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer. “We are evaluating actions to adjust our FedEx Express U.S. domestic network capacity and improve efficiency.”