FedEx Corp.'s latest quarterly profit beat Wall Street expectations thanks to higher rates and an increase in deliveries, as the company continues to benefit from the growth in online shopping.
Executives on Tuesday predicted record business during the holiday season later this year, and said they are considering surcharges to offset higher costs.
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The day before, rival United Parcel Service Inc. announced new surcharges for the weeks around Black Friday and Christmas.
Retailers are seeing Christmas sales shift from stores to their customers' computer and smartphone screens. That has caused bumpy holiday seasons for FedEx and UPS, which have often either been caught off-guard by a surge in volume or wound up hiring more temporary workers than they needed. Both companies have spent heavily to increase capacity during the holidays, including lining up more space for cargo on planes and trucks.
UPS announced Monday that it will add a new surcharge of up to $1 per package on deliveries to homes in certain weeks around Black Friday and Christmas. UPS will levy much bigger surcharges on oversized and extremely heavy items.
FedEx Executive Vice President Rajesh Subramaniam said Tuesday that the company is looking at several options around surcharges but hasn't made any decisions.
"We are focused on ensuring that we are compensated for the investments we make to deliver outstanding service during peak," Subramaniam said during a call with investors. He added that company also may raise prices for large or heavy items such as furniture and mattresses, which are sold online and are showing up more often on FedEx trucks.
FedEx said it earned $1.02 billion in its fiscal fourth quarter, which ran from March through May, compared with a loss of $70 million a year earlier.
Excluding pension valuations, restructuring costs and other items, the Memphis-based company said it earned $4.25 per share. That handily beat the $3.89 per share average forecast from 10 analysts surveyed by Zacks Investment Research.
Revenue rose 21 percent to $15.73 billion, with about two-thirds of the increase due to the acquisition of Dutch delivery company TNT Express. The analysts had expected $15.56 billion.
In FedEx's express air-delivery business, revenue rose 7 percent and operating income climbed 14 percent. The big ground-delivery unit boosted revenue by 9 percent and income by 7 percent.
The results marked a rebound from the company's disappointing third-quarter numbers.
For the fiscal year, FedEx reported profit of $3 billion, or $11.07 per share, on revenue of $60.32 billion.
The company forecast earnings in its new fiscal year of between $13.20 and $14 per share.
Logan Purk, an analyst for Edward Jones, said FedEx built expectations for a strong quarter when it declined to reduce its full-year outlook after a disappointing third quarter. But, he said in an interview, the company's confidence turned out to be well-founded.
"It was an exceptional quarter," Purk said. "They more or less smashed the (Wall Street forecast) number."
Purk said an improved profit margin in the ground-delivery business should ease what had been a major investor concern. The TNT acquisition should also eventually pay dividends as FedEx cuts some costs while investing in new sorting facilities and other assets, he said.
CFRA Research analyst Jim Corridore said FedEx is in good position to benefit from the increase in online commerce. Strong global demand should boost delivery volumes and lead to higher prices over the next two years, he said.
FedEx's stock rose less than 1 percent in aftermarket trading.
The shares are up nearly 30 percent in the past year. They closed down $1.50 to $208.95 in regular trading before the quarterly results.
Elements of this story were generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on FDX at https://www.zacks.com/ap/FDX
Keywords: FedEx, Earnings Report
This story corrects forecast earnings in 14th paragraph.