FedEx share price down, reports lower-than-expected Q2 results

FedEx Corp reported increased quarterly profit, but below expectations due to higher aircraft maintenance expenses as the US delivery giant restated its full-year earnings outlook.

For the fiscal second quarter ended November 30, Memphis-based FedEx reported a 5% increase in revenue to $11.9 billion, compared to last years $11.4 billion. The companys performance benefited from lower fuel prices, with FedExs more that 90 000 vehicles and 600 airplanes.

Earnings per share stood at $2.14 up 34% compared to last year on a net income of $616 million, up from the $500 million of last year. Analysts surveyed by Thomson Reuters projected earnings per share of $2.22 with revenue at $11.99 billion.

Another contributor to the results was the companys restructuring program, under which FedEx upgraded its airplanes to be more fuel efficient. The company also offered shares to around 3 600 ex-workers.

Revenue from FedEx Express, its largest segment, climbed 3% to $7.02 billion, boosted by higher US volumes, the company said. During the quarter US domestic packages climbed 7%, including a 10% jump in overnight deliveries, partly offset by unfavorable exchange rates. However, US domestic revenue per package fell 2%.

Operating margin increased to 8.5%, up from 7.3% a yea ago.

Revenue in the companys ground segment jumped 8% to $3.06 million due to a 5% increase in average daily volumes in both business-to-business and home deliveries. Revenue per package edged up 3%.

For the holiday season FedEx hired an additional 50 000 worker, 25% up from the employees it needed a year ago, and implemented a new technology to increase efficiency in order to avoid 2013s holiday crisis, which resulted in more than 2 million undelivered packages on Christmas Eve.

The company has been on an acquisition spree this week, on Monday FedEx said it had agreed to purchase Genco, North Americas second-largest third-party logistic provider. On the next day, FedEx said it had obtained Bongo International, a private company which enables online retailers to make international purchases.

FedEx restated its projection of $8.50 to $9.00 earnings per share for the financial year ending May 31, 2015. Analysts have predicted per-share earnings at $9.14 for the period.

FedEx lost 1.14% on Tuesday and closed at $174.26 in New York. On Wednesday the stock plunged 5.04% to trade at $165.47 at 15:24 GMT, marking a one-year increase of 19.02%. The company is valued at $49.36 billion. According to the Financial Times, the 24 analysts offering 12-month price targets for FedEx have a median target of $182.00, with a high estimate of $210.00 and a low estimate of $155.00. The median estimate represents a 4.44% increase from the last close price of $174.26.