uploads///FDX Express

Higher Package Yield Drove FedEx’s Express Segment’s Revenue

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Jun. 22 2017, Updated 6:05 p.m. ET

FedEx Express’s fiscal 4Q17 revenue

In fiscal 4Q17, FedEx’s (FDX) Express segment’s total revenue was $7.1 billion, compared to $6.7 billion in fiscal 4Q16, a year-over-year (or YoY) rise of 6.9%.

The Express segment remains a major contributor to FedEx’s total revenue. The rise in the segment’s fiscal 4Q17 revenue was the result of the revenue growth in its US Overnight Envelope, US Deferred, and International Economy services.

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US domestic operations

In fiscal 4Q17, FedEx’s overall US domestic express package revenue was $3.2 billion, a rise of 7.2% compared to its level of $3.0 billion in fiscal 4Q16. A yield growth of 6.9% aided by a slight rise in average daily volumes drove the company’s US domestic operations. Its yield growth was primarily the result of rate improvements, discounts, and the change in its dimensional divisor.

In terms of FedEx’s US domestic express package services, its US deferred package revenue rose a solid 14.7% in fiscal 4Q17.

International operations

In fiscal 4Q17, FedEx Express’s international express package revenue rose 7.3% to $2.5 billion, compared to $2.4 billion in 4Q16. Its international export package yields expanded 2%. However, these yields were flat if we exclude the impact of fuel and the exchange rate.

Most of the company’s revenue rise was in its International Economy segment, which witnessed a 10% revenue rise in the quarter. While the company’s International Economy segment’s average daily volumes rose 6%, its international domestic services witnessed an 8.1% rise in such volumes. The company’s international priority services saw volume growth of 5% in the reported quarter.

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Management’s outlook

FedEx Express’s share in the company’s total fiscal 4Q17 revenue fell to 46% in fiscal 4Q17, compared to ~52% a year ago. Roughly 55% of FDX’s operating profits came from the Express segment. The company is aiming for huge improvements in the Express segment network, which includes an indigenous expansion in Europe.

Notably, since February 2017, the company has been adjusting the Express segment’s fuel surcharge on a weekly basis instead of a monthly one. Beginning in fiscal 1Q18, FDX will combine TNT Express’s financials with FedEx Express’s.

Investing in ETFs

If you want to invest in US transportation stocks, consider the First Trust Industrials/Producer Durables AlphaDEX ETF (FXR). Major airlines (DAL), railroad companies (CSX), and trucking companies (JBHT) make up a combined ~20% of the portfolio holdings of this ETF.

In the next article, we’ll analyze FedEx’s Ground segment’s fiscal 4Q17 results.

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