FedEx spending on distribution hubs weighs on its 2Q profit

AP News
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Posted: Dec 20, 2016 6:18 PM

NEW YORK (AP) — FedEx is spending heavily on distribution hubs and hiring more employees to meet heaving demand for its shipping services, expenses that weighed on its second-quarter profit.

The Memphis, Tennessee-based company on Tuesday reported adjusted earnings that missed Wall Street expectations. Its shares fell 3 percent in after-hours trading.

FedEx is in the midst of what it expects to be another record-breaking holiday shipping season. It said demand is higher than usual this year since Christmas Day falls on a Sunday. Last month, FedEx said it expects volume to be up 10 percent from last year but didn't provide specific numbers.

Overall, FedEx reported net income of $700 million, or $2.59 per share, in the three months ending Nov. 30. That's up from $691 million, or $2.44 per share, in the same quarter a year ago.

Earnings, adjusted to remove the costs related to its recent acquisition of TNT Express, were $2.80 per share. That's well below the $2.91 per share that analysts expected, according to FactSet.

Revenue rose 20 percent to $14.93 billion, beating the $14.91 billion that analysts expected.

But its operating expenses rose 22 percent to $13.8 billion.

Shares of FedEx Corp. fell $5.99 to $192.75 in after-market trading following the releases of the earnings report.