FedEx’s 3Q17 Express revenue
In 3Q17, FedEx’s (FDX) Express segment reported revenue of $6.7 billion as compared to $6.5 billion in 3Q16, a 3.4% rise on a year-over-year basis. This segment is a major contributor to FedEx’s overall revenues. The growth in the Express segment’s revenue was mainly due to a 4.3% growth in the company’s international export package average daily volumes.
US domestic operations
Total US package revenues were $3.1 billion in 3Q17, up 2.6% from $3.0 billion on a year-over-year basis. The growth was mainly due to a 3.1% yield growth, backed by a 1% rise in average daily volumes. The yield rose mainly due to increased weight per package, better rates and discounts, and changes in its dim weight devisor.
The one less operating day in 3Q17 impacted the company’s revenue growth and the year-over-year comparison. In US domestic operations, US overnight envelope packages saw YoY growth of 2.6% in 3Q17.
International express package revenue rose 4% from $2.19 billion in 3Q16 to $2.28 billion in 3Q17. These revenues consist of international priority, international economy, and international domestic (or international intra-country operations) services.
Much of the revenue rise came from the International Economy segment, where the revenue rose 4.4% in 3Q17. The International Economy’s average daily volumes growth was just 1.7%, but the yield expressed in revenue per package rose 4.5% in 3Q17. The International Priority volumes rose 5.4% in the same period.
The International Export package yield rose 1% on account of the favorable impact of rate and discount changes, higher weight per package, and region mix. Excluding the exchange rate and fuel impact, the yield rose 2% mainly due to product and destination mix.
FedEx Express forms ~53% of the company’s revenue and accounts for ~55% of its profits. FDX expects margins to improve further, adding to the company’s profitability. Effective January 2, 2017, FDX increased its FedEx Express rates by an average 3.9%.
Plus, the company also changed the dimensional weight divisor for this segment from 166 to 139, which should result in better revenues going forward. Beginning in February 2017, FDX started adjusting the fuel surcharge for the FedEx Express segment on a weekly basis instead of on a monthly basis.
Investing in ETFs
Investors who want exposure to 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 12.8% and 5.6% of FXR, respectively.
Next, we’ll review FedEx’s Ground segment performance.