Subscribe to our free, weekly email newsletter!


Fiscal first quarter is positive for FedEx Freight

By Jeff Berman, Group News Editor
September 19, 2012

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 headshot
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. .(JavaScript must be enabled to view this email address).


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!

Recent Entries

UPS Access Point locations serve as a replacement delivery address when consumers are not at home to receive a package or when consumers want a delivery to go somewhere other than their residence.

Non asset-based third-party logistics services provider Roadrunner Transportation Systems Inc. (RRTS) said this week it has acquired El Paso, Texas-based Stagecoach Cartage and Distribution for $35 million along with an earn-out at $5 million.

The three California port directors who faced the wrath of shippers at the annual meeting of the Agriculture Transportation Coalition (AgTC) in San Francisco late last June, surprised many with their candor and heartfelt mea culpas.

Matson, Inc., a leading U.S. carrier in the Pacific, is moving quickly to fund improvements in its new Alaska operations following its May 29 acquisition of Horizon Lines' Alaska services.

Josh Green, CEO of Panjiva, an online search engine with detailed information on global suppliers and manufacturers, said despite the recent trends coming out of China, it is important to remember is that on a big picture level, its impact on the global economy is big and growing.

Article Topics

News · FedEx · LTL · Less-Than-Truckload · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA