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What Hamstrung FedEx Express’s Revenue Growth?

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FedEx Express segment’s fiscal 1Q18 revenues

In fiscal 1Q18, FedEx’s (FDX) Express segment’s overall revenues totaled $8.6 billion, compared with $8.5 billion in fiscal 1Q17. This translates into a YoY (year-over-year) rise of 2.3%.

FDX started consolidating TNT Express’s revenues with its Express segment in fiscal 1Q18. The Express vertical remains the largest contributor to FedEx’s total revenues, accounting for 57%.

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Segment details

In fiscal 1Q18, US domestic Express package revenues were ~$3.1 billion, or 3.5% higher than its $3.0 billion in fiscal 1Q17. The US deferred average daily package volume rose 6.3%, compared with the 4.4% fall in US overnight average daily package volumes in 1Q18.

The Express division’s domestic yield grew 4.6%, though the average daily package volumes fell 1.1% YoY in fiscal 1Q18. International Express package revenues grew 4.3% to $2.5 billion from $2.4 billion in 1Q17, and the package yield of international export packages rose 2%. Notably, these yields were slightly higher after excluding the impact of fuel and exchange rates.

An 11.1% rise in the international economy revenues led to the revenue growth in fiscal 1Q18. This division witnessed 6% growth in average daily package volumes, while international domestic service’s volumes expanded almost 5%.

Management outlook

FedEx is looking for improvements in the Express vertical network, which includes expansion in Europe. On September 18, 2017, FDX announced its plan to raise shipping rates by 4.9% in the Express segment. In February 2017, FedEx started adjusting its Express segment’s fuel surcharge on a weekly basis.

Investors optimistic about US transport and logistics stocks might consider investing in the First Trust Industrials/Producer Durables AlphaDEX Fund (FXR). Major airlines (JBLU), railroads (UNP), and trucking (SWFT) companies make up ~20% of the portfolio holdings of FXRR.

Next, we’ll consider FedEx’s Ground segment’s results in fiscal 1Q18.

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