Why FedEx’s Ground Revenues Rose in Fiscal 1Q18
FedEx Ground’s fiscal 1Q18 revenues
FedEx’s (FDX) Ground segment saw its revenues grow 8.1% to $4.6 billion in fiscal 1Q18, up from $4.3 billion in fiscal 1Q17. The Ground segment is the second-largest contributor to FDX’s total revenues.
The segment’s revenues rose primarily on account of the 4% growth in average daily package volumes and increased base rates for commercial services.
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Ground segment’s volumes and yield
FedEx Ground includes the Ground business and FedEx Supply Chain, which includes GENCO revenues. SmartPost revenues are consolidated into Ground revenues. On a standalone basis, FedEx Ground revenues grew 9% to $4.2 billion in fiscal 1Q18, up from $3.9 billion in fiscal 1Q17. Supply chain revenues fell 0.3% to $398.0 million.
The segmental yield jumped 4.7% to $8.47 per package, up from $8.09 per package in fiscal 1Q17. Ground’s average daily package volumes also expanded ~4.1% in fiscal 1Q18. The yearly rate hike, along with a change in dimension weight devisors, caused the yield to improve, but the yield also rose due to e-commerce sales. If we exclude the impact of fuel, the Ground segment’s yield per package rose 4% due to commercial services.
On September 18, 2017, FDX announced a 4.9% increase in shipping rates for the Ground segment. Effective January 22, 2018, this will apply the dimensional weight pricing to FedEx SmartPost shipments.
FedEx has started gearing up for the peak holiday shipping season by filling vacancies in its Ground and Express networks. It anticipates that 50,000 additional team members will be hired across its all verticals for the peak season. FDX has been focusing as well on automating its sortation facilities and upgrading its initiatives in the Ground segment.
Parcel delivery giants such as FDX and United Parcel Service (UPS) are included in the transport sector. This sector is a subgroup of the industrial sector. For indirect exposure to the US Industrial sector, you might consider the iShares US Industrials ETF (IYJ), which has holdings in Boeing (BA), General Electric (GE), and 3M Company (MMM).
Now, we’ll move to FedEx’s Freight segment.