The parcel giant FedEx outperformed the Wall Street's predictions for this quarter and showed steady revenue growth, despite the pricey acquisition of a Dutch TNT Express this May.
This was the first full quarter together for the two companies and it seems to work out quite well so far. FedEx (NASDAQ: FDX) has exceeded the Wall Street's prediction of the adjusted net income at $2.78 per share and demonstrated the $2.90 per share result in their first fiscal quarter. In addition to that, the Memphis-based company has demonstrated a 19.5% higher revenue as compared to the same period of last year. This quarter's revenue amounted to $14.7 billion, which is significantly higher than the estimated $14.44 billion. Net income also saw an improvement from $692 ($2.42 per share) in the same quarter last year to $715 ($2.65 per share) this quarter.
“FedEx Express revenue increased slightly as improved base yields, higher package volume and increased freight pounds more than offset lower fuel surcharges and unfavourable currency exchange rates,” the company said.
On the pleasant news of the quarterly results, FedEx stock jumped almost 6% at the market opening today. This is quite an impressive result for the company that has completed a pricey acquisition of an overseas company only some 4 months ago. The Wall Street Journal mentioned that the integration of the Dutch TNT into FedEx's main business negatively affected the company's earnings for a short period by dragging them down for about 17 cents per share. On top of that, expenses related to the intangible asset amortization for TNT ate up additional 8 cents from "per-share" profits.
FedEx's CEO Frederick W. Smith says that the integration of TNT, which the company acquired for €4.4 billion this May, is going as planned.
"The integration of TNT Express is proceeding smoothly, and the level of team members’ engagement is outstanding. Managing our operating companies as a portfolio of customer solutions helped FedEx achieve strong financial and operating results in the quarter, especially given the global economy’s continued low growth,” Smith said in the press release.
This quarter, TNT Express has contributed $1.8 billion in revenues and $14 million of operating costs towards the total quarterly earnings of the company, reports the WSJ. FedEx bets on the Dutch TNT to help the company grow its network across the European market.
“Our team is extremely excited about the TNT Express integration, and we are discovering many possibilities for achieving high returns. As we integrate these networks and take advantage of the unmatched road capabilities of TNT Express, I am confident there is going to be a tremendous opportunity to increase the earnings of FedEx Corporation,”s aid Alan B. Graf, FedEx's Chief Financial Officer in the press release.
Interestingly, FedEx's main rival, the United Parcel Services (NYSE: UPS), also wanted to acquire the Dutch TNT Express back in 2013 but the deal was rejected by the European antitrust agency.
Anyway, the fact that FedEx has managed to demonstrate profitable quarterly results, despite the hefty acquisition and a slowdown in American and global economy is quite impressive. As of writing, FDX trades at $172.90 and is up more than 6%.