FedEx electric power delivery truck image by Arvell Dorsey Jr. under Creative Commons license.

FedEx Corporation (NYSE:FDX) reported strong results for the first quarter of its fiscal year 2015 Wednesday, as net income increased 24% from the prior year to $606 million. Overall revenue advanced by 6%, and diluted earnings per share rose 37% to $2.10 per share. In its earnings press release, FedEx reaffirmed its guidance for full-year diluted EPS of $8.50 to $9.00, with the caveat that fuel prices remain stable and the company's forecast for "moderate economic growth" stays intact.  The following are key highlights from the earnings report:

Earnings show balance on all fronts
Each of FedEx's segments -- Express, Ground, and Freight -- posted increases in both revenue and operating income during the quarter. Most impressive was the Freight segment, which expanded revenue by 13% and income by 7%, due to increased average daily shipments in its "LTL," or less-than-truckload, category. The Express segment, FedEx's largest division, which contributed about 58% of total company revenue in the quarter, grew modestly, with both revenue and income rising roughly 4%.

You can think of the Ground segment as the workhorse of the company: Its revenues are typically half of the Express segment's, but, due to a much higher operating margin, this division contributes more to FedEx's bottom line. The Ground segment saw revenue rise 8%, with operating margin inching up less than a percentage point, to 18.4%. As we anticipated in our FedEx earnings preview, Ground's operating margin increase was held back somewhat by network expansion costs, which are necessary for future revenue growth.

Credible progress toward a new operating goal
In the company's fourth-quarter earnings call in June, management announced a goal to achieve double-digit annual operating income margin in the near future, a feat it hasn't achieved since before the recession.

Over the last five years, the company's operating margin has averaged 6.5%. However, FedEx achieved an operating margin of 7.6% last year, and hit the 10% mark in its final quarter of fiscal 2014.

First-quarter operating margin came in at 8.5%, continuing above trend and lending credence to the idea that FedEx can hit double-digit margin on an annual basis fairly soon. This number will be important to watch over the next several quarters, as consistently higher profits would provide important support to the company's stock price going forward.

Price increases announced
One of FedEx's revenue levers, in addition to increased volume, has been its ability to price in economic growth as the global economy continues to improve post-recession. Yesterday, the company announced the equivalent of 5% rate increases in each of its three segments. This is in addition to the previously announced switch to dimensional weight pricing (price based on package size rather than weight) in its Ground segment, which will become effective in January 2015. 

The rather significant 5% increase is of interest, as it will keep the company ahead of cost input inflation, and perhaps provide some buffer should the global recovery moderate over the next year. Indeed, this week the Organization for Economic Cooperation and Development cut its forecast for 2014 U.S. economic growth from 2.5% to 2.1%. The OECD revised forecasts for other large, industrialized countries as well.

Also noteworthy is FedEx's decision to proceed with a price increase in its Express segment, despite plans announced last month by the United States Postal Service to slash Express delivery rates to certain large retailers ahead of the holiday season. By moving ahead with its plan to lift Express rates, FedEx is likely reaffirming its value proposition, and forcing retail customers to consider whether, even at a steep discount, it's advisable to utilize the postal service, which contributed to delivery delays during the previous year's holiday season.  

Capex and share buybacks increase, impacting cash
This year, FedEx projects a significant amount of capital expenditure, or capex -- roughly $4.2 billion -- for upgrades to its air fleet and expansion of its ground network, in addition to other maintenance costs. In the first quarter, the company incurred $720 million in capex, a 26% increase over the prior year's quarter. In addition, the company repurchased $791 million of its shares, far outpacing the $278 million it spent on this activity last year.

As we had anticipated in our earnings preview, these two actions combined affected cash on the balance sheet, which dropped from $2.9 billion on May 31 to $2.4 billion on Aug. 31. With the share buyback program winding down, it's reasonable to assume that cash will stabilize over the next couple of quarters, as the projected capex spend is moderated somewhat by the company's stronger cash flow from increased operating margin, as well as lower pension expenses. Investors may want to keep an eye on balances in the company's coffers in subsequent earnings reports -- this is one of the few wrinkles in an otherwise strong start to FedEx's fiscal year.

Asit Sharma has no position in any stocks mentioned. The Motley Fool recommends FedEx. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.