FedEx Corporation (NYSE: FDX) stock fell over 1.9% in the pre-market session on September 18th, 2018 (As of 7:29 AM GMT-4; Source: Google finance) after the company posted mixed result for the first quarter of FY 19. The company’s earnings came in at $835 million, compared with $596 million in last year’s first quarter, driven by a solid execution of the business plan and a strong U.S. economy. Financial results benefited from higher volumes, increased yields and a favorable net impact of fuel at all of the transportation segments. During the first quarter, the integration activities have began in all of the major markets in Europe, and the company anticipate the completion of the integration in the Middle East at the end of this calendar year. The integration of TNT continues to expand the network, improve the global capabilities and the competitive posture and of course, increase profitability.
Moreover, Higher variable compensation accruals and accelerated wage increases have negatively affected results this quarter by $170 million driven by lower accrual levels last year for variable compensation due to the effect of the cyberattack at TNT, which negatively impacted the results, and the accelerated wage increases for certain hourly employees in the U.S. following the enactment of the TCJA.
FDX in the first quarter of FY 19 has reported the adjusted earnings per share of $3.46, missing the analysts’ estimates for the adjusted earnings per share of $3.82. The company had reported the adjusted revenue growth of 11.8 percent to $17.1 billion in the first quarter of FY 19, beating the analysts’ estimates for revenue of $16.88 billion. FDX expects to improve operating income by $1.2 billion to $1.5 billion in fiscal 2020 versus fiscal 2017.
For FY 19, FDX expects revenue growth of approximately 9%, operating margin of approximately 7.9% and operating margin of approximately 8.5% excluding TNT Express integration expenses. The company expects earnings in the range of $15.85 to $16.45 per diluted share before year-end MTM retirement plan accounting adjustments, up from the prior forecast of $15.65 to $16.25 per diluted share. The company projects earnings to be between $17.20 to $17.80 per diluted share before year-end MTM retirement plan accounting adjustments and excluding TNT Express integration expenses, up from the prior forecast of $17.00 to $17.60 per diluted share. ETR of approximately 25% prior to year-end MTM retirement plan accounting adjustments is expected and capital spending of $5.6 billion.