“The continued execution of our strategies drove improved third quarter results,” said Frederick W. Smith, FedEx Corp. chairman and chief executive officer. “I am proud of our team members around the world, who are constantly proving their resilience amidst a rapidly evolving global environment. FedEx is supporting our team members and others affected by the ongoing conflict in Ukraine as we hope to soon see a return to peace.”
Third quarter operating income improved due to higher revenue per shipment and a net fuel benefit at all transportation segments. The quarter’s results also benefited from lower variable compensation expense and less severe winter weather, resulting in favorable year-over-year comparisons. The improved results were partially offset by the effects of the Omicron variant, as well as higher purchased transportation costs and wage rates.
“We successfully executed during the holiday peak season, resulting in record December operating income,” said Michael C. Lenz, FedEx Corp. executive vice president and chief financial officer. “Our strong quarterly operating income increase was dampened by the surge of the Omicron variant which caused disruptions to our networks and diminished customer demand in January and into February. We remain focused on revenue quality and operational efficiency initiatives to mitigate inflationary pressures and drive earnings improvement.”
Third quarter net income included a tax benefit of $78 million ($0.29 per diluted share) related to revisions of prior year estimates for actual tax return results. Last year’s net income included discrete tax benefits of $108 million ($0.40 per diluted share).
FedEx Ground operating results declined primarily due to increased rates for purchased transportation and employee wages, network inefficiencies, and expansion-related costs. These costs were partially offset by higher revenue per package, a boost from two additional ground commercial operating weekdays, and a net fuel benefit. Average daily volume was flat, as Ground Economy declined and growth in commercial and FedEx Home Delivery services was constrained by the effects of the Omicron variant.
FedEx Freight third quarter operating income nearly tripled, driven by a continued focus on revenue quality and profitable growth. Revenue per shipment increased 19% and average daily shipments grew 2% during the quarter, while the operating margin increased 850 basis points to 15.0%.
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