FedEx Reports Earnings Drop, Buys More Planes

MICHAEL WADDELL | Special to The Daily News

FedEx Corp. this morning reported revenue rose 5 percent to $11.1 billion for its fiscal second quarter, compared to $10.6 billion during the same period in 2011. Operating income dropped $718 million, 8 percent from $780 million last year.

"Operating income for the quarter improved at FedEx Freight and FedEx Ground due to increased volumes and higher yields, while persistent weakness in the global economy and increased demand for lower-yielding international services limited profits at FedEx Express," said Frederick W. Smith, FedEx chairman, president and CEO, in a statement. "Earnings also were negatively impacted by disruptions caused by Superstorm Sandy."

The company's operating margin was 6.5 percent, down from 7.4 percent the previous year, and net income totaled $438 million, down 12 percent from last year's $497 million.

The earnings report comes as the Memphis-based shipping giant buys four Boeing 767 freighters to replace older workhorses with more fuel-efficient planes.

Financial terms of the Boeing purchase weren’t disclosed. The sticker price on a 767 freighter is about $182.8 million, but discounts are commonplace.

The planes will allow the world's second-largest package delivery company to dump some of its MD-10 aircraft, many of which are more than 30 years old. The new planes are also larger and can carry more on fewer flights.

The planes will be delivered in 2015. As part of the deal, FedEx pushed back delivery of two 777 freighters to 2016 from 2015.

FedEx is currently experiencing another record-setting holiday shipping season, driven by the continued growth of e-commerce. On Dec. 17, the company set a new daily record by moving approximately 19.8 million shipments.

The Associated Press contributed to this report.