FedEx (NYSE:FDX), the nation's largest express delivery company, reported first-quarter earnings of $0.42 per share. Net income declined 19% to $128 million due to the cost of funding an early retirement program at its FedEx Express unit. On an operating basis, EPS grew 17% to $0.61 per share on revenue up 4% to $5.69 billion.
The company now reports financial results broken down into three segments: FedEx Express, FedEx Ground, and FedEx Freight.
FedEx Express, the core express transport segment of the company, accounts for 73% of total revenues. Revenues at the unit grew 4% to $4.14 billion. On an operating basis, the segment reported an increase in operating income of 21%. However, on a GAAP basis, operating income declined 82% to $23 million due to the division's early retirement and severance programs begun in June. The FedEx Express unit also reported a tax gain of $0.08 per share from a favorable court ruling.
FedEx Ground grew revenues by 5% to $914 million in the quarter, and FedEx Freight gained 4% to $637 million.
FedEx expects realignment costs from the Express division for fiscal 2004 to be between $230 million and $290 million, the bulk of which will be sustained in the first two quarters. The company expects cost savings of $100 to $130 million this year, for a net cost of $130 million to $160 million. Next year, annual savings from the program are expected to reach $150 million to $190 million.
The business looks to be in good shape, as modest revenue growth continues to drive operating profitability. And in time, the Express Segment's early retirement program should provide long-run cost benefits.
Going forward, FedEx expects earnings of $0.80 to $0.90 per share in the second quarter and $3 to $3.15 per share for fiscal 2004, excluding both costs and savings from the restructuring. FedEx shares remain largely unchanged on the earnings report.
FedEx is among David Gardner's top picks in Motley Fool Stock Advisor. You can reach Jeff Hwang at[email protected].
