FedEx cashes in on premium logistics services, fuel surcharges

FedEx Corp. delivered strong third quarter results driven by higher volumes and pricing for premium B2B and B2C shipping services, but bullishness for peak holiday season demand was tempered by expectations for lower domestic margins amid a rise in transitory labor and outsourced trucking costs that likely will spill into next year.

Consolidated revenue grew 12% to $22.9 billion, with adjusted operating income of $1.2 billion, up 16% year over year, the freight transportation giant reported after the market closed on Wednesday, beating Wall Street expectations. Adjusted earnings per share was $3.74, up 28% from the prior year.

A quarter of FedEx’s (NYSE: FDX) revenue growth is attributable to higher fuel surcharges. Results also benefitted from continued structural cost reductions from network optimization initiatives. FedEx so far has closed 260 delivery stations and expects to realize $1 billion in recurring savings because of network and corporate restructuring by the end of the year, and $2 billion in savings by the end of 2027.

Network integration has been completed in large metropolitan areas like Dallas, San Francisco, Phoenix and Washington, D.C., along with Canada last year. Early next year, FedEx will tackle Los Angeles; Charlotte, North Carolina; and Oklahoma City, CEO Raj Subramaniam told analysts during a conference call about the financial results.

This story was originally published by FreightWaves. Read the full story at FreightWaves →