Market Overview

FedEx Corp. Reports Second Quarter Results


Earnings Outlook Lowered Primarily Due to European Weakness
New Cost-Reduction Initiatives

FedEx Corp. (NYSE:FDX) today reported the following consolidated
results for the second quarter ended November 30 (adjusted measures
exclude the items listed below for the applicable fiscal year):


Fiscal 2019

Fiscal 2018

As Reported





As Reported





Revenue $17.8 billion $17.8 billion $16.3 billion $16.3 billion
Operating income $1.17 billion $1.33 billion $1.12 billion $1.24 billion
Operating margin 6.6% 7.5% 6.8% 7.6%
Net income $935 million $1.08 billion $775 million $866 million
Diluted EPS $3.51 $4.03 $2.84 $3.18

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 $0.34 $0.33
FedEx Ground legal matter 0.17
Net U.S. deferred tax liability remeasurement



"FedEx is in the midst of another record-setting holiday season, and we
salute our more than 450,000 team members worldwide for delivering
outstanding customer service," said Frederick W. Smith, FedEx Corp.
chairman and chief executive officer. "While the U.S. economy remains
solid, our international business weakened during the quarter,
especially in Europe. We are taking action to mitigate the impact of
this trend through new cost-reduction initiatives."

Cost-Reduction Actions

In addition to lowering variable compensation, FedEx is implementing
other cost-reduction initiatives to mitigate below-plan performance.
These actions include:

  • A voluntary buyout program for eligible employees
  • International network capacity reductions at FedEx Express
  • Limited hiring in staff functions
  • Reductions in discretionary spending

Efforts to improve productivity will continue, including expanding the
use of technology and capitalizing on efficiencies available through
network scale.

Second Quarter Results

Operating income grew during the quarter due to higher volumes,
increased yields and a favorable net impact of fuel at all
transportation segments. Lower variable compensation also benefited
results for the quarter. At FedEx Express, operating results were
negatively impacted during the quarter by lower-than-expected
international revenue, especially in Europe and Asia, higher growth in
lower-yielding services across the network and the timing of aircraft
maintenance events.

Net results benefited by $0.56 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.

Last year's results included the estimated negative impacts of the
NotPetya cyberattack affecting TNT Express ($100 million or $0.31 per
diluted share) and a tax benefit from foreign tax credits associated
with a dividend paid from foreign operations ($80 million or $0.29 per
diluted share).

The company acquired 2.8 million shares of FedEx common stock during the
quarter at an average price of $228.35.


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 is now forecasting for fiscal 2019:

  • Earnings of $12.65 to $13.40 per diluted share before year-end MTM
    retirement plan accounting adjustments, down from the prior forecast
    of $15.85 to $16.45 per diluted share;
  • Earnings of $15.50 to $16.60 per diluted share before year-end MTM
    retirement plan accounting adjustments and excluding TNT Express
    integration expenses, charges related to a FedEx Ground legal matter,
    charges associated with the voluntary employee buyout program and the
    revision to the provisional benefit from the remeasurement of the net
    U.S. deferred tax liability included in fiscal 2018 earnings, down
    from the prior forecast of $17.20 to $17.80 per diluted share;
  • ETR of 24% to 25% prior to year-end MTM retirement plan accounting
    adjustments; and
  • Capital spending of $5.6 billion.

These forecasts assume moderate U.S. domestic economic growth and no
further weakening in international economic conditions from the current
forecast. 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.

A pre-tax cash charge related to the voluntary buyout program for
U.S.-based employees is expected to total $450 million to $575 million
and should predominantly occur in the fourth quarter of fiscal 2019.
Actual costs will depend on employee acceptance rates. Savings from this
program are expected to be $225 million to $275 million in fiscal 2020.
Similar programs are being considered for employees in international

Management still expects to realize the benefits from TNT Express that
were anticipated when the company was acquired. However,
lower-than-expected express package volume due to European economic
weakness that accelerated during the quarter and is expected to
continue, and a change in service mix following the June 2017
cyberattack on TNT Express, will delay the anticipated realization of
these benefits. As a result, the target to increase FedEx Express
operating income by $1.2 billion to $1.5 billion over fiscal 2017
results will not be achieved in fiscal 2020.

"Global trade has slowed in recent months and leading indicators point
to ongoing deceleration in global trade near-term," said Alan B. Graf,
Jr., FedEx Corp. executive vice president and chief financial officer.
"These trends, coupled with the change in service mix at FedEx Express,
are negatively impacting the segment's financial results. We remain
committed to actively managing costs with a heightened focus on
increasing efficiency across the organization."

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 $69 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 450,000 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

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 5:30 p.m. EST on December 18, are available on the
company's website at
A replay of the conference call webcast will be posted on our website
following the call.

The Investor Relations page of our website,,
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 and to achieve the
expected benefits from the combined businesses, changes in fuel prices
or currency exchange rates, our ability to match capacity to shifting
volume levels, evolving or 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 successfully implement our cost-reduction initiatives and
productivity enhancements, 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 the United Kingdom's vote to leave the European
Union, 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


Second Quarter Fiscal 2019 and Fiscal 2018

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 second quarter
fiscal 2019 and 2018 consolidated operating income and margin, net
income and diluted earnings per share, and adjusted second 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;
  • Fiscal 2019 charges related to a legal matter involving FedEx Ground;
  • The fiscal 2019 revision to the net U.S. deferred tax liability
    remeasurement included in our fiscal 2018 earnings.

We have incurred and expect to incur significant expenses through fiscal
2020, and may incur additional expenses thereafter, in connection with
our integration of TNT Express. We have adjusted our second quarter
fiscal 2019 and 2018 consolidated financial measures and the FedEx
Express segment second 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 professional
and legal fees, salaries and employee benefits, advertising expenses and
travel. Internal salaries and employee benefits 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

Charges related to an agreement in principle to settle a legal matter
involving FedEx Ground are excluded from our second quarter fiscal 2019
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.

The fiscal 2019 revision to the provisional benefit from the
remeasurement of our net U.S. deferred tax liability included in our
fiscal 2018 earnings is excluded from our second quarter fiscal 2019
consolidated non-GAAP financial measures because it results from the

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