Motley Fool Stock Advisor
recommendation Federal Express
For the fourth quarter ended May 31, FedEx's total revenues rose 8% to $5.83 billion. Income grew 19% to $280 million from $236 million. Earnings per share were $0.92, two pennies ahead of expectations, and 18% above last year's Q4 results.
Looking at its fiscal year, FedEx's revenues were better by 9%, to $22.5 billion. Net income improved by 17% to $830 million, with earnings per share reaching $2.74. The company earned $2.34 a share, including a $0.05 accounting charge, last year.
FedEx produced $360 million in free cash flow during the year, below the $578 million it generated in fiscal 2002. That's largely a factor of FedEx's more than $1 billion in voluntary pension plan contributions it made during the year. Its capital expenditures actually shrank vs. the year before, as it keeps firming up the FedEx Express division. It will spend more on capital expenditures in fiscal 2004, but mainly on FedEx Ground.
As in quarters past, FedEx Ground was the company's fastest-growing unit. In Q4, revenues grew 18% to $880 million, and operating income was up 17% to $150 million. For the whole year, FedEx Ground returned revenue growth of 26%, to $3.41 billion, and a whopping operating income growth of 47%.
That compares to FedEx Express' 6% revenue growth for the quarter, and 7% revenue growth for the year. Operating income for this division, which is FedEx's primary business, grew 26% in Q4, but declined 3% for the full year.
FedEx Ground's average daily package volume improved 13% in the fourth quarter, and 24% for the year. FedEx Express's average daily package volume, in contrast, was flat for the quarter, and up 1% for the year. Both divisions experienced better yields, however.
FedEx is attempting to bring its FedEx Express costs more in line with the stagnation it's seeing from the unit, as evidenced by the company's just-announced voluntary staff reductions. By keeping things tight here, and pouring more resources into FedEx Ground, the company should be able to keep showing up at the door with good results. Though the reductions will cost the company between $0.25-$0.30 a share for fiscal 2004, in the long run, they'll be worth it.