FedEx Posts Weak Results For Fiscal Fourth Quarter And Full Year

FedEx Corp. FDX reported late Tuesday a $1.97 billion net loss in its fiscal 2019 fourth quarter on revenue of $17.8 billion. Adjusted for various events, net income in the quarter came in at $1.32 billion.

Operating income in the fourth quarter fell to $1.32 billion, compared to $1.33 billion in the year-earlier quarter. On an adjusted basis, operating income declined to $1.72 billion from $1.85 billion, the Memphis-based company reported. Operating margin fell to 7.4 percent from 7.7 percent. On an adjusted basis, margins dropped to 9.6 percent from 10.7 percent. Net income came in at $1.13 billion, while on an adjusted basis net income was reported at $1.6 billion.

Adjusted earnings per share came in at $5.01 versus $5.91 per share in the fiscal 2018 fourth quarter.

In fiscal 2019, which ended May 31, 2019, FedEx revenue was more than $69 billion, up from $65.5 billion. Net income was $540 million, while on an adjusted basis it came in at $4.13 billion. In fiscal 2018, net income was $4.57 billion, while on an adjusted basis it came in at $4.17 billion. Operating income in the company's fourth quarter was $4.47 billion, compared to $4.27 billion in the same quarter of fiscal 2018. On an adjusted basis, fiscal 2019 operating income was $5.22 billion compared with $5.14 billion in the prior fiscal year. Adjusted operating margins dropped to 7.5 percent from 7.8 percent.

Adjusted diluted earnings per share came in at $15.52, down from $15.31 in fiscal 2018.

The main adjustment was a fiscal fourth quarter non-cash mark-to-market charge of $3.9 billion related to the company's retirement plan assumptions. There were smaller charges relating to ongoing costs of integrating its TNT Express unit, and for what the company called "business realignment" costs. The company expects $1.7 billion in TNT integration costs through fiscal 2021. About 20 percent of the costs will be incurred in the current fiscal year.

For fiscal 2020, FedEx projected a low-single-digit percentage point increase in diluted earnings per share. FedEx's recent results have been buffeted by weakness in global demand and elevated costs to combine TNT Express. All of that has fallen on its FedEx Express air and international unit. The unit's fiscal 2020 operating income will continue to be affected by macroeconomic weakness and trade uncertainty, shifts to lower-yielding non-priority air shipments and a decision not to renew the domestic air contract with Amazon.com, Inc. AMZN, business worth about $150 million to $200 million annually. Operating income at FedEx's ground parcel and less-than-truckload units should rise year-over-year, the company said.

FedEx's fiscal 2019 fourth quarter results were expected to be weak, with the question being how weak. In a statement announcing the results, Chairman and CEO Frederick W. Smith called the quarter and fiscal year periods of "challenge and change," and said the company was making the needed investments to prepare itself for major changes in the domestic and international delivery landscapes.

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