FedEx Corp. (NYSE: FDX) today reported the following
consolidated results for the first quarter ended August 31
(adjusted measures exclude the items listed below for the
applicable fiscal year):
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Solid execution of its business plan
helped FedEx increase first-quarter earnings. More than 130
automated facilities at FedEx Ground feature state-of-the-art
technology such as six-sided scanning of packages and sorting
decisions made in less than half a second. (Photo: Business
Wire)
Fiscal 2019
Fiscal 2018
As Reported
(GAAP)
Adjusted
(non-GAAP)
As Reported
(GAAP)
Adjusted
(non-GAAP)
Revenue $17.1 billion $17.1 billion $15.3 billion $15.3 billion
Operating income $1.07 billion $1.19 billion $971 million $1.09
billion Operating margin 6.3% 7.0% 6.3% 7.1% Net income $835
million $933 million $596 million $683 million Diluted EPS $3.10
$3.46 $2.19 $2.51
This year’s and last year’s quarterly consolidated results have
been adjusted for:
Impact per diluted share
Fiscal 2019 Fiscal 2018 TNT
Express integration expenses $ 0.36 $ 0.30 FedEx Trade Networks
legal matters — 0.02
“FedEx delivered higher first-quarter earnings driven by solid
execution of our business plan and a strong U.S. economy,” said
Frederick W. Smith, FedEx Corp. chairman and chief executive
officer. “We are very optimistic about our prospects for profitable
growth and remain confident we will reach our goal to improve FedEx
Express operating income by $1.2 billion to $1.5 billion in fiscal
2020 versus fiscal 2017.”
Operating income improved during the quarter, benefiting from
higher volumes, increased yields and a favorable net impact of fuel
at all transportation segments. Net results benefited by $0.50 per
diluted share as a result of the enactment of the Tax Cuts and Jobs
Act (TCJA), primarily from a lower statutory income tax rate.
FedEx recognized substantially higher variable compensation
accruals during the quarter, as last year’s first quarter results
were negatively impacted by the NotPetya cyberattack at TNT
Express. Also, during the fourth quarter of fiscal 2018 the company
accelerated wage increases for certain hourly employees due to the
enactment of the TCJA. Collectively, the impact of these items
negatively affected year-over-year results by $170 million ($0.48
per diluted share).
Last year’s earnings included the estimated negative impacts of
the NotPetya cyberattack affecting TNT Express ($300 million or
$0.79 per diluted share) and Hurricane Harvey ($0.02 per diluted
share). As previously disclosed, new pension accounting rules are
now in effect and fiscal 2018 results have been recast to reflect
application of the new rules. The new rules have no effect on net
income or earnings per share.
The company acquired 2.6 million shares of FedEx common stock
during the quarter at an average price of $238.95.
Outlook
FedEx is unable to forecast the fiscal 2019 year-end
mark-to-market (MTM) retirement plan accounting adjustments. As a
result, the company is unable to provide a fiscal 2019 earnings per
share or effective tax rate (ETR) outlook on a GAAP basis.
FedEx has increased its fiscal 2019 earnings per share outlook
and reaffirms its other financial targets for the year:
- Revenue growth of approximately
9%;
- Operating margin of approximately
7.9%;
- Operating margin of approximately 8.5%
excluding TNT Express integration expenses;
- Earnings of $15.85 to $16.45 per
diluted share before year-end MTM retirement plan accounting
adjustments, up from the prior forecast of $15.65 to $16.25 per
diluted share;
- Earnings of $17.20 to $17.80 per
diluted share before year-end MTM retirement plan accounting
adjustments and excluding TNT Express integration expenses, up from
the prior forecast of $17.00 to $17.60 per diluted share;
- ETR of approximately 25% prior to
year-end MTM retirement plan accounting adjustments; and
- Capital spending of $5.6 billion.
These forecasts assume moderate economic growth and stability in
global trade. The company’s ETR and earnings per share outlooks are
based on current TCJA interpretative guidance and are subject to
change based on future guidance.
“As expected, the quarter’s results were affected by our
decision to invest in our team members following the passage of the
Tax Cuts and Jobs Act,” said Alan B. Graf, Jr., FedEx Corp.
executive vice president and chief financial officer. “We remain
committed to increasing earnings, margins, cash flows and returns
this year.”
Corporate Overview
FedEx Corp. (NYSE: FDX) provides customers and businesses
worldwide with a broad portfolio of transportation, e-commerce and
business services. With annual revenues of $67 billion, the company
offers integrated business solutions through operating companies
competing collectively and managed collaboratively, under the
respected FedEx brand. Consistently ranked among the world's most
admired and trusted employers, FedEx inspires its more than 425,000
team members to remain focused on safety, the highest ethical and
professional standards and the needs of their customers and
communities. To learn more about how FedEx connects people and
possibilities around the world, please visit about.fedex.com.
Additional information and operating data are contained in the
company’s annual report, Form 10-K, Form 10-Qs, Form 8-Ks, and
Statistical Books. These materials, as well as a webcast of the
earnings release conference call to be held at 5:00 p.m. EDT on
September 17, are available on the company’s website at
investors.fedex.com. A replay of the
conference call webcast will be posted on our website following the
call.
The Investor Relations page of our website, investors.fedex.com, contains a significant amount
of information about FedEx, including our Securities and Exchange
Commission (SEC) filings and financial and other information for
investors. The information that we post on our Investor Relations
website could be deemed to be material information. We encourage
investors, the media and others interested in the company to visit
this website from time to time, as information is updated and new
information is posted.
Certain statements in this press release may be considered
forward-looking statements, such as statements relating to
management’s views with respect to future events and financial
performance. Such forward-looking statements are subject to risks,
uncertainties and other factors which could cause actual results to
differ materially from historical experience or from future results
expressed or implied by such forward-looking statements. Potential
risks and uncertainties include, but are not limited to, economic
conditions in the global markets in which we operate, a significant
data breach or other disruption to our technology infrastructure,
anti-trade measures and changes in international trade policies,
our ability to successfully integrate the businesses and operations
of FedEx Express and TNT Express in the expected time frame and at
the expected cost, changes in fuel prices or currency exchange
rates, our ability to match capacity to shifting volume levels, new
U.S. domestic or international government regulation, future
guidance, regulations, interpretations or challenges to our tax
positions relating to the TCJA and our ability to realize the
benefits of certain provisions of the TCJA, our ability to
effectively operate, integrate, leverage and grow acquired
businesses, our ability to achieve our FedEx Express segment profit
improvement goal, legal challenges or changes related to
owner-operators engaged by FedEx Ground and the drivers providing
services on their behalf, disruptions or modifications in service
by, or changes in the business or financial soundness of, the U.S.
Postal Service, the impact of any international conflicts or
terrorist activities and other factors which can be found in FedEx
Corp.’s and its subsidiaries’ press releases and FedEx Corp.’s
filings with the SEC. Any forward-looking statement speaks only as
of the date on which it is made. We do not undertake or assume any
obligation to update or revise any forward-looking statement,
whether as a result of new information, future events or
otherwise.
The financial section of this release is provided on the
company's website at investors.fedex.com
RECONCILIATIONS OF NON-GAAP FINANCIAL
MEASURESTO GAAP FINANCIAL MEASURES
First Quarter Fiscal 2019 and Fiscal
2018 Results
The company reports its financial results in accordance with
accounting principles generally accepted in the United States
(“GAAP” or “reported”). We have supplemented the reporting of our
financial information determined in accordance with GAAP with
certain non-GAAP (or “adjusted”) financial measures, including our
adjusted first quarter fiscal 2019 and 2018 consolidated operating
income and margin, net income and diluted earnings per share, and
adjusted first quarter fiscal 2019 and 2018 FedEx Express segment
operating income and margin. These financial measures have been
adjusted to exclude the impact of the following items (as
applicable):
- TNT Express integration expenses
incurred in fiscal 2019 and 2018; and
- Fiscal 2018 charges related to certain
pending U.S. Customs and Border Protection matters involving FedEx
Trade Networks.
We have incurred and expect to incur significant expenses over
the next few years in connection with our integration of TNT
Express. We have adjusted our first quarter fiscal 2019 and 2018
consolidated financial measures and the FedEx Express segment first
quarter fiscal 2019 and 2018 financial measures to exclude TNT
Express integration expenses because we generally would not incur
such expenses as part of our continuing operations. The integration
expenses are predominantly incremental costs directly associated
with the integration of TNT Express, including salaries and wages,
professional and legal fees, advertising expenses and travel.
Internal salaries and wages are included only to the extent the
individuals are assigned full-time to integration activities. The
integration expenses also include any restructuring charges at TNT
Express.
Charges related to certain pending U.S. Customs and Border
Protection matters involving FedEx Trade Networks are excluded from
our first quarter fiscal 2018 consolidated non-GAAP financial
measures because they are unrelated to our core operating
performance and to assist investors with assessing trends in our
underlying businesses.
We believe these adjusted financial measures facilitate analysis
and comparisons of our ongoing business operations because they
exclude items that may not be indicative of, or are unrelated to,
the company’s and our business segments’ core operating
performance, and may assist investors with comparisons to prior
periods and assessing trends in our underlying businesses. These
adjustments are consistent with how management views our
businesses. Management uses these non-GAAP financial measures in
making financial, operating and planning decisions and evaluating
the company’s and each business segment’s ongoing performance.
Our non-GAAP measures are intended to supplement and should be
read together with, and are not an alternative or substitute for,
and should not be considered superior to, our reported financial
results. Accordingly, users of our financial statements should not
place undue reliance on these non-GAAP financial measures. Because
non-GAAP financial measures are not standardized, it may not be
possible to compare these financial measures with other companies’
non-GAAP financial measures having the same or similar names. As
required by SEC rules, the tables below present a reconciliation of
our presented non-GAAP financial measures to the most directly
comparable GAAP measures.
Fiscal 2019 Operating Margin, Earnings
Per Share and ETR Forecasts
Our fiscal 2019 operating margin forecast is a non-GAAP
financial measure because it excludes estimated fiscal 2019 TNT
Express integration expenses. Our fiscal 2019 earnings per share
(EPS) forecast is a non-GAAP financial measure because it excludes
the fiscal 2019 year-end MTM retirement plan accounting adjustments
and estimated fiscal 2019 TNT Express integration expenses. Our
fiscal 2019 ETR forecast is a non-GAAP financial measure because it
excludes the fiscal 2019 year-end MTM retirement plan accounting
adjustments.
We have provided these non-GAAP financial measures for the same
reasons that were outlined above for historical non-GAAP measures.
These items are excluded from our fiscal 2019 operating margin, EPS
and ETR forecasts, as applicable, for the same reasons described
above for historical non-GAAP measures.
We are unable to predict the amount of the year-end MTM
retirement plan accounting adjustments, as they are significantly
impacted by changes in interest rates and the financial markets, so
such adjustments are not included in our fiscal 2019 EPS and ETR
forecasts. For this reason, a full reconciliation of our fiscal
2019 EPS and ETR forecasts to the most directly comparable GAAP
measures is impracticable. It is reasonably possible, however, that
our fiscal 2019 year-end MTM retirement plan accounting adjustments
could have a material impact on our fiscal 2019 consolidated
financial results and ETR.
As previously disclosed, the provisional benefit from the
remeasurement of our net U.S. deferred tax liability included in
our fiscal 2018 earnings is an estimate subject to adjustment
during a 12-month measurement period ending in fiscal 2019. Any
adjustment to this provisional benefit will be excluded from our
fiscal 2019 non-GAAP earning measures, which is consistent with our
presentation of the effects of the initial provisional benefit in
our fiscal 2018 non-GAAP earnings measures.
The table included below titled “Fiscal 2019 Earnings Per Share
Outlook” outlines the impacts of the items that are excluded from
our fiscal 2019 EPS forecast, other than the year-end MTM
retirement plan accounting adjustments. Additionally, the table
below titled “Fiscal 2019 Operating Margin Forecast” presents a
reconciliation of our presented non-GAAP measure to the most
directly comparable GAAP measure.
First Quarter
Fiscal 2019
FedEx
Corporation
Dollars in millions, except EPS
Operating
Income
Net
Diluted Earnings
Income
Margin
Taxes1
Income2
Per Share
GAAP measure $ 1,071 6.3 %
$ 266 $ 835 $ 3.10 TNT
Express integration expenses3
121
0.7
%
23
98
0.36
Non-GAAP measure $ 1,192 7.0 % $ 289 $ 933 $ 3.46
FedEx Express
Segment
Dollars in millions
Operating
Income
Margin
GAAP measure $ 367 4.0 % TNT
Express integration expenses
102
1.1 % Non-GAAP measure $ 469 5.1 %
First Quarter
Fiscal 2018
FedEx
Corporation
Dollars in millions, except EPS
Operating
Income
Net
Diluted Earnings
Income
Margin
Taxes1
Income2
Per Share
GAAP measure $ 971 6.3 %
$ 386
$
596
$ 2.19 TNT Express integration expenses3
112
0.7
%
30
82
0.30
FedEx Trade Networks legal matters
7
0.1
%
2
5
0.02
Non-GAAP measure $ 1,090 7.1 % $ 418 $ 683 $ 2.51
FedEx Express
Segment
Dollars in millions
Operating
Income
Margin5
GAAP measure $ 320 3.8 % TNT
Express integration expenses
88
1.0 % Non-GAAP measure $ 408 4.9 %
Fiscal 2019
Operating Margin Forecast
Operating
Margin
GAAP measure 7.9% TNT Express integration expenses
0.6% Non-GAAP measure 8.5%
Fiscal 2019
Earnings Per Share Outlook
Dollars in millions, except EPS
Adjustments
Diluted Earnings
Per Share
Earnings per diluted share before year-end MTM retirement plan
accounting adjustments (non-GAAP)4,6
$15.85 to $16.45
TNT Express integration expenses
$450
Income tax effect1
(85)
Net of tax effect
$365
1.35
Earnings per diluted share with adjustments4,7
$17.20 to $17.80
Notes: 1 – Income taxes are based on the
company’s approximate statutory tax rates applicable to each
transaction, and for fiscal 2019, give consideration to the effects
of the TCJA on the fiscal 2019 rates. 2 – Effect of “Total other
(expense) income” on net income amount not shown. 3 – These
expenses, including restructuring charges, were recognized at FedEx
Corporate and FedEx Express. 4 – The year-end MTM retirement plan
accounting adjustments, which are impracticable to calculate at
this time, are excluded. 5 – Does not sum to total due to rounding.
6 – Previous forecast was $15.65 to $16.25 per diluted share. 7 –
Previous forecast was $17.00 to $17.60 per diluted share.
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FedEx Corp.Media Contact:Jess Bunn, 901-818-7463orInvestor
Contact:Mickey Foster, 901-818-7468Home Page: fedex.com
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