What Drove the FedEx Ground Segment’s Revenues in 4Q16?

Now that we’ve seen the FedEx (FDX) Express segment’s performance, let’s take a look at the FedEx Ground segment. The FedEx Ground segment’s revenues rose by 20% from $3.6 billion in 4Q15 to $4.3 billion in 4Q16. Increased FedEx Ground volumes and the recording of SmartPost revenues on a gross basis rather than a net basis led to the rise in revenues.

The FedEx Ground segment consists of FedEx Ground and GENCO. GENCO is a North American third-party logistics provider that was acquired by FedEx in 2015. FedEx Ground revenues rose by 20%, from $3.2 billion to $3.8 billion. GENCO revenues increased from $329.0 million to $397.0 million in 4Q16, a rise of 21%.

FedEx Ground average daily package volumes rose by 10% in 4Q16. This was due to sustained growth after peak season volumes for residential and commercial deliveries. FedEx Ground revenue per package rose by 7%. The change in the treatment of revenues from a net basis to a gross basis resulted in higher revenue.

FedEx Ground yield per package covering SmartPost rose 8.6% between 4Q15 and 4Q16. Extra service charges and increased weight per package resulted in the rise, and it was partly offset by lower SmartPost volume/mix.

FedEx anticipates that FedEx Ground revenues will grow in fiscal 2017, largely driven by e-commerce volume growth and an enhanced market share. The company expects higher yield due to profit improvement initiatives, which predominantly include pricing changes for larger shipments.

Investors interested in the transportation and logistics sectors could consider the iShares US Industrials ETF (IYJ). Major railroads such as CSX (CSX) and Union Pacific (UNP) and prominent airlines (DAL) make up ~5.2% and ~4.8% of IYJ’s portfolio holdings, respectively. Keep reading to learn more about the FedEx Freight segment’s performance in 4Q16.