FedEx Corporation (NYSE: FDX) stock enhanced over 2.3% in the pre-market session on boosted by the better than forecasted second quarter of 2018 performance.
The group expects their U.S. market to improve with Consumer confidence being at a 17-year high, and solid PMI readings show the industrial sector is expanding. Moreover, U.S. tax reform passage might boost next year’s U.S. GDP forecast.
During the second quarter the U.S. domestic express business, revenue and yield surged 6% and 5%, respectively. Without fuel surcharge, the yield per package surged 3% on the back of the ongoing focus on revenue quality.
FedEx International export package revenue managed to deliver a rise of 7% on a year-over-year basis for the quarter even though they faced the cyberattack at TNT. The group’s Ground segment revenues delivered a double-digit rise at 12% driven by e-commerce growth. At FedEx Freight, revenue per LTL shipment enhanced 7% boosted by revenue quality efforts.
Overall the adjusted earnings per share during the quarter rose 15% yoy to $3.18, while adjusted operating income enhanced 11% to $813 million, on the back of revenue growth and positive net impact from fuel and ongoing cost efficiencies. The group’s adjusted operating margin rose 20 basis points to 8.7%. The group is enhancing their portions of their TNT integration on the back of the cyberattack. TNT integration expenses reached $96 million for Express during the quarter. Freight’s operating margin enhanced 120 basis points on a year-over-year to 6.7% as the group’s revenue quality initiatives showed results.

The group is enhancing their FY ’18 forecast on the back of a better revenue quality, solid demand trends and in restoring business which was hurt by the summer’s cyberattack. As a result, they expect a better financial results in the second half. They are implementing several cost reductions at Ground for the rest of FY ’18. The group intends to minimize the financial impacts from the cyberattack in the second half of fiscal ’18 in the form of lower revenues. The TNT integration continues, spanning over 200 countries. By the end of FY ’20, the group expects to have a combined pickup and delivery operations at the local level, one global and regional air and ground network and consolidated operations, customs clearance, sales and back office information technology systems.

