By: Ben Meyer, www.americanshipper.com, March 21, 2018
The Memphis-based parcel giant reported a net income of $2.07 billion in the third quarter of its fiscal 2018 year, up a whopping 257 percent from the same period last year, thanks in large part to an estimated $1.15 billion reduction in tax liability.
FedEx Corp. saw its earnings skyrocket 257 percent to $2.07 billion in the third quarter of its fiscal 2018 year, which ended Feb. 28, according to the company’s most recent financial statements.
The Memphis-based parcel and express carrier posted diluted earnings per share (EPS) of $7.59 for the quarter compared with $2.07 per share in the same 2017 period, beating consensus analyst expectations by $0.61 per share, according to a report from investment analyst Seeking Alpha.
Revenues for the quarter stood at $16.5 billion, up 10 percent year-over-year and beating analyst expectations by $350 million.
FedEx attributed the surge in net income and EPS primarily to an estimated $1.53 billion ($5.60 per share) reduction in the company’s net U.S. deferred tax liability stemming from the recent passage of the Tax and Jobs Act, which lowered the effective federal tax rate for U.S. corporations from 35 percent to 21 percent.
Operating results also benefited from higher base rates, increased volume at FedEx Ground and FedEx Freight, and a favorable net impact from fuel, the company said. Those factors were offset in part by negative impacts from an increase variable compensation accruals, increased peak-related costs at FedEx Express, adverse weather, and an increase in expenses related to the integration of TNT Express, which FedEx purchased for $4.9 billion in May 2016.
“Execution of our long-term growth strategies, customer demand for the unique value of our broad portfolio of solutions and healthy growth in the global economy are driving our performance,” Frederick W. Smith, FedEx Corp. chairman and chief executive officer, said of the results. “We expect strong operating performance in each of our transportation segments in the fourth quarter.
In an earnings call with analysts, Smith said the company expects the tax reforms in the U.S. to “continue to increase economic growth and investment,” but warned heightened international trade tensions could derail those gains.
"FedEx is concerned about the prospect of increased protectionist tariffs as history has shown repeatedly that protectionism is counterproductive to economic growth," he said, stopping short of mentioning President Donald Trump or the recently signed Section 232 tariffs on U.S. imports of steel and aluminum.
Smith also mentioned the recent explosion of a package at a FedEx distribution center in Schertz, Texas, that left one employee with minor injuries, saying the company was thankful that no one was seriously injured in the incident.
FedEx said in a statement yesterday that the company has intercepted a second package shipped by the same individual and turned it over to law enforcement for further investigation.
That individual is also believed to have been responsible for a string of bombings in the Austin area, but authorities may not be able to confirm this suspicion as the primary suspect in that investigation died early Wednesday morning following a confrontation with police.
Brian Manley, Austin’s interim chief of police, said at a press conference the suspect, a 24-year-old white male who was later identified as Mark Anthony Conditt, activated an explosive device inside his own vehicle as law enforcement attempted to apprehend him on the side of Interstate 35 near Round Rock, Texas.
"The suspect is deceased and has significant injuries from a blast that occurred from detonating a bomb inside his vehicle," said Manley.
Looking ahead to the remainder of the company’s fiscal 2018 year, FedEx raised its full-year earnings forecast to between $15.00 and $15.40 per share, excluding items related to tax benefits, pensions, and TNT integration expenses, up from a previous projection of between $12.70 and $13.30 per share.
“We are increasing our fiscal 2018 earnings outlook due to foreign tax benefits from our international corporate structure, the benefits from U.S. tax reform and improved operating performance,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “We remain committed to improving operating income at the FedEx Express segment by $1.2 to $1.5 billion in fiscal 2020 versus fiscal 2017.”
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