10-QPeriod: Q3 FY2022

FEDEX CORP Quarterly Report for Q3 Ended Feb 28, 2022

Filed March 17, 2022For Securities:FDX

Summary

FedEx Corporation (FDX) reported a 10% increase in revenue for the third quarter of fiscal year 2022, reaching $23.6 billion, and a 13% increase for the nine-month period to $69.1 billion. This growth was primarily driven by yield management strategies, higher fuel surcharges, and volume increases at FedEx Ground and FedEx Freight. Despite revenue growth, the company faced significant cost pressures, particularly from labor market challenges and wage increases, which impacted operating income, especially at FedEx Ground. Overall consolidated operating income rose 32% year-over-year for the quarter, but the nine-month operating income saw a more modest 6% increase. Diluted EPS saw a substantial boost of 27% for the quarter, though it declined 3% for the nine-month period due to various factors including business realignment costs and retirement plan adjustments.

Financial Highlights

42 data points
Beta

Revenue

$23.64B

Net Income

$1.11B

4.7% Net Margin

EPS (Diluted)

$4.20

Total Assets

$84.11B

Cash & Equivalents

$6.07B

Free Cash Flow

$2.25B

Financial Statements
Beta
Revenue$23.64B
Operating Expenses$22.32B
Operating Income$1.33B
Net Income$1.11B
EPS (Basic)$4.26
EPS (Diluted)$4.20
Shares Outstanding (Basic)261.00M
Shares Outstanding (Diluted)265.00M

Key Highlights

  • 1Consolidated revenue increased by 10% to $23.6 billion for the three months ended February 27, 2022, and by 13% to $69.1 billion for the nine months ended February 27, 2022.
  • 2Operating income increased by 32% to $1.3 billion for the three months ended February 27, 2022, but for the nine-month period, it increased by a more modest 6% to $4.3 billion.
  • 3Diluted earnings per share (EPS) rose by 27% to $4.20 for the three months ended February 27, 2022, but decreased by 3% to $12.17 for the nine-month period.
  • 4FedEx Express saw a revenue increase of 5% for the quarter, driven by yield improvements, while FedEx Ground revenue grew 10% and FedEx Freight experienced a significant 23% revenue jump, both benefiting from volume growth and yield management.
  • 5The company incurred $107 million in business realignment costs in the third quarter related to a workforce reduction plan in Europe.
  • 6Labor market challenges and wage pressures were cited as significant factors negatively impacting operating expenses and network efficiencies across segments.
  • 7FedEx announced a new stock repurchase program of up to $5 billion and repurchased $2.2 billion of common stock during the nine months ended February 28, 2022, including an accelerated share repurchase (ASR) of $1.5 billion.

Frequently Asked Questions

Revenue growth was primarily driven by yield management actions, higher fuel surcharges, and volume growth, particularly at FedEx Ground and FedEx Freight. Favorable year-over-year comparisons due to severe winter weather in the prior year also contributed.

The primary challenges impacting profitability are elevated operating expenses stemming from labor market difficulties, including wage pressures and network inefficiencies. The Omicron variant of COVID-19 also caused network disruptions and reduced shipping demand during the quarter.

FedEx is focused on yield management and improving revenue quality to offset increased labor costs and inflation. They are also executing targeted actions to improve productivity through advanced technology and operational optimization, and continuing to optimize their network capacity.

FedEx anticipates revenue and operating income to improve in the fourth quarter, driven by yield growth. They expect cost pressures related to labor markets to subside as they lap prior year impacts, while continuing to focus on productivity and network optimization. The outlook is contingent on external factors such as global economic conditions and geopolitical developments.