uploads///FedEx Freight

Higher Daily LTL Shipments Boost FedEx Freight Revenues in Fiscal 2Q17

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Dec. 23 2016, Updated 10:36 a.m. ET

FedEx Freight revenues in 2Q17

In fiscal 2Q17, FedEx’s (FDX) Freight segment revenues rose 3.2% YoY (year-over-year) to $1.59 billion, as compared to $1.54 billion in fiscal 2Q16. Higher average daily LTL (less-than-truckload) volumes drove the rise.

Overall revenues from the segment increased as well. Lower fuel surcharge revenues and reduced weight per package caused the revenues per LTL shipment to end up flat, but the FedEx Freight Priority average daily shipments grew 5.5% YoY in fiscal 2Q17, while weight per LTL shipment in pounds fell ~2%.

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Management insight

The FedEx Freight segment offers LTL services at any hauling distance, and the segment’s revenues also include revenue from FedEx Custom Critical, which provides time-sensitive and critical shipment services in the US.

In its fiscal 1Q17 earnings call, FedEx announced a rise of 4.9% in the Freight segment. Beginning in February 2017, FDX will be revising fuel surcharges for the segment on a weekly basis. FDX has also hinted of further pricing improvements in the Freight segment going forward.

FedEx anticipates higher FedEx Freight revenues in fiscal 2017 due to expected volume growth and improved base yield. It also expects reasonable volume growth from small- and medium-sized customers to add this segment’s revenues over the next three quarters.

Investing in ETFs

Investors opting for investments in US transportation stocks, including airlines (DAL), railroads (CSX), trucking (JBHT), and other logistics companies (UPS) can consider the First Trust Industrials/Producer Durables AlphaDEX Fund (FXR). Major US airlines and prominent railroads make up 15.8% and 5.1%, respectively, of FXR.

In the next part, we’ll discuss FDX’s overall operating margins and segment margins in fiscal 2Q17.

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