Fiscal first quarter is positive for FedEx Freight

While the fiscal year 2013 first earnings forecast for FedEx was lowered due to concern about the global economy on the company’s fiscal first quarter earnings call this week, FedEx Freight, the company’s market-leading less-than-truckload subsidiary had a strong quarterly performance.

By ·

While the fiscal year 2013 first earnings forecast for FedEx was lowered due to concern about the global economy on the company’s fiscal first quarter earnings call this week, FedEx Freight, the company’s market-leading less-than-truckload subsidiary had a strong quarterly performance.

In the fiscal first quarter, FedEx Freight had an operating income of $90 million, which represented a 114 percent increase over $42 million from the same time frame a year ago. Revenue—at $1.4 billion—was 5 percent better than $1.33 billion a year ago, and its 6.4 percent operating margin was ahead of last year’s 3.2 percent.

Company officials said that average daily LTL shipments increased 4 percent, driven by an increase in shipper demand for its FedEx Freight Economy service in all lengths of haul.

The FedEx Freight Economy service is part of FedEx Freight’s 2011 network re-launch, which focused on offering shippers the choice of two levels of service from a single company. Both services, FedEx Freight Priority and FedEx Freight Economy, are designed to meet the needs of today’s LTL shippers, FedEx said when it was introduced.

Prior to the launch of the revamped LTL network, FedEx Freight President and CEO Bill Logue described it as a growth strategy to grow its business profitably for the long-term and a “game changer” designed to simplify what FedEx determined was a too complicated LTL shipping process. The idea, he said, was to give LTL shippers two options, based on speed of delivery and price. The new FedEx Freight network is comprised of FedEx Freight Priority, a fast-transit choice for reliable, time-sensitive LTL freight delivery, and FedEx Freight Economy, a less costly choice for reliable LTL freight delivery.

For the fiscal first quarter, FedEx said LTL yield rose 2 percent because of improvements in FedEx Freight Economy yields. FedEx Freight Priority and FedEx Freight Economy revenue per hundredweight was down 1 percent and up 10 percent, respectively.

And FedEx added that operating income and margin mainly went up due to profitable volume growth, higher yield, and operational efficiency improvements. Even with the various quarterly gains, composite weight per LTL shipment—at 1,150 pounds—dipped 1 percent.

On the earnings call, Logue said FedEx was “very pleased” with Freight’s quarterly performance.

“A lot of the focus we have is on making sure that…the customer’s embracing our new offering in choice, and that’s clear,” he said. “And our objective is to make sure that whether customer picks a priority or economy shipment in any length of haul, that we’ll be profitable.

Logue added that the current pricing environment for LTL is rational, explaining that yield is an important focus and the FedEx Freight sales team is doing a nice job of managing the market environment.

In June, FedEx Freight announced a 6.9 percent general rate increase (GRI), which took effect July 9. FedEx officials said in June that this increase will apply to FedEx Freight shipments within the contiguous United States between the contiguous U.S. and Canada and within Canada. And it added that the rate for cross-border FedEx Freight shipments between the U.S. and Canada will also increase 6.9 percent for the U.S. portion for the U.S. portion of the shipment and will also take effect on July 9.

Stifel Nicolaus analyst David Ross noted in a research note that FedEx Freight saw faster-than-expected margin expansion through cost management, while seeing respectable volumes.


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

FedEx · Less-Than-Truckload · LTL · All Topics
Latest Whitepaper
Identify Cost Savings with Real-Time Visibility
To offset the impact of late shipments, unreported delays and detention, shippers are increasingly requiring 100 percent visibility into the location and status of their freight.
Download Today!
From the August 2017 Logistics Management Magazine Issue
Which carriers, third-party logistics providers, and North American ports have crossed the service excellence finish line ahead of their competitors? Our readers have cast their votes, and now it’s time to introduce this year’s winners of the coveted Quest for Quality Awards.
BMW Takes the Inland Road to Efficiency
Global Logistics: No Shortcuts to Security
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Getting the most out of your 3PL relationship
Join Evan Armstrong, president of Armstrong & Associates, as he explains how creating a balanced portfolio of "Top 50" global and domestic partners can maximize efficiency and mitigate risk.
Register Today!
EDITORS' PICKS
34th Annual Quest for Quality Awards: Winners Revealed
Which carriers, third-party logistics providers, and North American ports have crossed the service...
2017 Top 50 3PLs: Investment and Consolidation Maintain Traction
The trend set over the past few years for mergers and acquisitions has hardly subsided, and a fresh...

2017 Salary Survey: Fresh Voices Express Optimism
Our “33rd Annual Salary Survey” reflects more diversity entering the logistics management...
LM Exclusive: Major Modes Join E-commerce Mix
While last mile carriers receive much of the attention, the traditional modal heavyweights are in...