FedEx reports strong fourth-quarter earnings, with revenue increases across the company

FedEx announced its fourth-quarter earnings Thursday, which largely saw increases in revenue across the board amid a quarter that saw nationwide inflation, gas prices rise and geopolitical tensions in Europe.

FedEx made $24.4 billion in revenue for the 2022 fiscal year’s fourth quarter, an 8% increase from the year-before quarter’s $22.6 billion. The company posted an adjusted operating income of $1.80 billion, a 32% increase from last year's $1.36 billion.

FedEx’s fourth quarter ended May 31. It marked the end of a strong fiscal year for the Memphis logistics giant, in which its outlook improved significantly from a year ago.

“Our fiscal 2022 financial performance was a result of our team's ability to adapt to a number of unexpected challenges and is a testament to the FedEx value proposition and the execution of our long-term strategy,” said Raj Subramaniam, FedEx Corp. president and chief executive officer, in a statement. “Our foundational investments have set the stage for a strong fiscal 2023. As we move forward, our focus will be on revenue quality and lowering our cost to serve. I am honored to lead our dedicated global team, who enable FedEx to lead the industry from a position of strength.”

Business-to-business shipping traffic has rebounded, while business-to-consumer volume has surged as more home deliveries are being made.

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The services of FedEx Express, FedEx’s largest company which focuses mainly on transporting items by air, have been in high demand as cargo capacity on passenger planes remains limited.

The company made $11.9 billion in revenue for the quarter, a 6% increase from $11.3 billion the year before. Operating income rose from $737 million to $886 million.

FedEx Express’ improved operating results are attributed to revenue management actions including increased fuel surcharges.

FedEx Ground, meanwhile, has reaped the benefits of the e-commerce boom, handling significantly higher package volumes and hiring delivery drivers in record numbers.

The company made $8.5 billion in revenue versus $8.1 billion the year-before quarter, though its operation income declined from $1.1 billion to $849 million.

FedEx Ground’s operating results can be attributed to higher self-insurance accruals and increased purchase transportation and wages — though costs were partially offset by higher revenue per package, including increased fuel surcharges.

Average daily volume also declined primarily due to yield management actions affecting the FedEx Ground Economy service.

FedEx shares closed at $228.13 Thursday.  The stock price has climbed since March’s earnings report, but it’s still below its 52-week high of $304.59.

FedEx reported an adjusted earnings per share of $6.87, slightly below projections. Wall Street analysts were predicting earnings per share of $6.91 on revenue of $24.3 billion, according to investment research company Zacks.

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FedEx executives pleased about fourth quarter but address challenges ahead

While FedEx’s executives were pleased with their companies’ fiscal success this quarter, they mentioned several notable challenges that partially offset that growth during an investors’ call Thursday afternoon.

That includes factors such as global volume softness and slower economic growth. With the first factor attributed to COVID-19 pandemic-related lockdowns in Asia and geopolitical uncertainty, mainly the ongoing war in Ukraine.

“Our continued emphasis on revenue quality drove significant improvement in our fourth quarter results,” said Michael C. Lenz, FedEx Corp. executive vice president and chief financial officer, in a statement. “We expect further momentum in fiscal 2023 and beyond as we execute on our initiatives to drive increased profitability and returns.”

Subramaniam said FedEx this weekend will move 52 tons of medical relief to Poland for Ukrainian refugees in coordination with Direct Relief International prior to detailing the logistic giant’s financial situation Thursday.

This was the first investors’ call for Subramaniam in his new role since taking over for founder Fred Smith.

He also noted the company’s efforts to move thousands of pounds of baby formula from Europe to the United States to help alleviate the critical shortage nationwide.

On labor, Subramaniam noted the company’s work to deal with the ongoing shortage it faced over the past couple of years.

“We have worked through many network inefficiencies caused by labor shortages,” he said. “Although wage rates remain higher than this time last year they’re stabilizing.”

FedEx spent about $7.90 billion on salaries and employee benefits, only a slight increase from the $7.87 billion a year prior. From 2020 to 2021, that figure increased by 21%.

FedEx also increased fuel spending by 88% from $789 million in fourth-quarter a year ago to $1.5 billion in fourth-quarter 2022.

Omer Yusuf covers the Ford project in Haywood County, residential real estate, tourism and banking for The Commercial Appeal. He can be reached via email Omer.Yusuf@commercialappeal.com or followed on Twitter @OmerAYusuf.

This article originally appeared on Memphis Commercial Appeal: FedEx earnings: Revenue increases across the company