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FedEx Ground’s 3Q18 Revenues: Higher Yield, Double-Digit Growth

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FedEx Ground’s fiscal 3Q18 revenues

In this part of the series, we’ll look at FedEx (FDX) Ground’s results for fiscal 3Q18. Its revenues grew 11% to $5.2 billion from $4.6 billion in the third quarter of fiscal 2017. With a 31.6% share in the company’s total revenues before eliminations, FedEx Ground was the second-largest contributor to total revenues in fiscal 3Q18.

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Volumes and yield

The FedEx Ground segment consists of FedEx Ground and FedEx Supply Chain. FedEx Ground’s revenues rose 12.3%, while FedEx Supply Chain’s revenues rose 1.5%. FedEx Ground’s 11% revenue growth was fueled by a 6% growth in average daily package volume and increased base rates. The segment delivered record volumes during the peak season through its highly automated, flexible network.

FedEx Ground’s total package volumes expanded 5.5%, and so did the average daily package volumes. Yield expressed in revenue per package rose 6.4% in fiscal 3Q18 on a year-over-year basis. Excluding the impact of the fuel surcharge, the yield per package grew 5%.

Management’s outlook

A 4.9% increase in the base rate for FedEx Ground, effective January 1, 2018, will keep FedEx Ground’s revenue growth on a high trajectory. Presently, FedEx has 10,000 FedEx Onsite locations in the United States, which excludes FedEx Office. Through its partnership with Walgreens, the company added ~8,000 FedEx Onsite locations in the last year.

FDX has been focused on automating its sorting facilities and upgrade initiatives in the FedEx Ground segment. The company plans to increase its retail network through the expansion of FedEx Office locations inside Walmart (WMT) stores. The company expects to add 500 FedEx Office locations over the next two years. FedEx’s peak pricing strategy of not levying an additional peak residential surcharge to customers helped increase the customer share in the small and medium customer segment.

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In the next part, we’ll look at FedEx Freight’s fiscal 3Q18 operating performance.

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