FedEx reports very strong FY 2022 and Q4 earnings

Memphis-based global freight transportation and logistics services bellwether FedEx issued strong Fiscal Year (FY) 2022 and fourth quarter earnings late yesterday.

FY 2022 full-year revenue—at $84 billion—rose 17.6% annually, and operating income—at $5.86 billion—climbed 46.8% annually.For the fiscal fourth quarter, revenue, at $22.6 billion, rose 23% annually, and operating income—at $1.80 billion—headed up 278%. Earnings per share—$6.88 (topping Wall Street expectations of $5.02 per share)—well outpaced the $1.28 per share recorded a year ago, as well as a $334 million loss.

FedEx officials explained that the company’s operating results saw gains mostly due to volume growth, coupled with disciplined revenue and portfolio management, noting that those factors were partially offset by costs to support strong demand, increased variable compensation expense, and higher labor rates.

“Fiscal ‘21 was truly unprecedented, and we are enormously proud of our 570,000 team members who performed magnificently to keep global health care, industrial and at-home supply chains open and, more recently, allowed significant additional commerce to flow,” said FedEx Chairman and CEO Fred Smith on the company’s earnings call. “The FedEx team’s role in moving PPE, vaccines and international release shipments has been perhaps this Company’s finest hour. Our financial results speak for themselves.”

The top FedEx executive added that the strategies the company has executed over the last several years were carefully developed and have been executed at a high level with great success overall, adding that the pandemic simply brought many of the market trends, which informed its strategies, forward. 

FedEx Express quarterly revenue—at $11.275 billion—increased 32% annually, with operating income up 118%, to $737 million. FedEx Ground revenue set a new quarterly record, rising 27%, to $8.132 billion, with operating income up 64%, to $1.105 billion. Revenue for FedEx Freight, its less-than-truckload segment, also set a new quarterly record, rising 38%, to $2.235 billion, with operating income up 173%, $360 million.

Total quarterly package revenue, at $8.7 billion, was up 36% annually. And total U.S. package revenue, at $3.917 billion, saw a 31% annual gain, with total international export package revenue up 41%, to $3.599 billion, and international domestic up 37%, to $1.184 billion.

Total daily U.S. domestic package volume increased 23%, to 3.268 million and U.S. revenue per package, at $18.44, was up 5%. Total daily international export packages at 1.084 million rose 31% annually, with revenue up 6%, to $51.05.

Average weight per shipment, for FedEx Freight, at 1,069 pounds, slipped 4%, with average revenue per shipment, at $292.12, up 6%. Total shipments per day—at 117,300—increased 30% annually.

“Fiscal year ‘21 was a pivotal year for FedEx as we delivered incredible financial performance, including record revenue and profit in Q4 and for the full fiscal year,” said FedEx President and COO Raj Subramaniam on the earnings call. “This is in no short measure due to the outstanding work by our global team members. Let me take this opportunity to say thank you to the FedEx team, especially those on the front lines, for going above and beyond the call of duty in these difficult times. When I look back at fiscal year ‘21, I’m proud of the role FedEx played in saving lives, helping small and medium businesses get back on their feet and keeping the globe connected.

The exceptional financial performance was driven by our robust growth strategy and focused execution on three key areas: e-commerce, operational excellence and digital innovation.”

And Brie Carrere, FedEx EVP, Chief Marketing and Communications Officer,

added that within the FedEx pricing strategy, the company continues to prioritize capacity for commercial, and small and medium customer segments, adding that to support the network amid ongoing capacity constraints, FedEx increased its peak surcharges as of June 21st, and will monitor and adjust its strategy as capacity and demand warrant.

“We will continue to confidently renegotiate our large customer segment contracts to increase profitability,” she said on the earnings call. “This means balancing product, day of week and lane mix at the customer level while ensuring appropriate surcharges and rate increases cover rising labor costs. Most large customer contracts in the U.S. are three years. Almost half of our total large segment volume had pricing agreement implementations in the past 12 months, leaving upside for fiscal year ‘22.”

What’s more, from a structural pricing perspective, Carrere said that FedEx believes that peak surcharges are kind of a new normal and that it has to align its pricing to its costs.

“We do anticipate every peak that there will be e-commerce surcharges,” she said. “We already have peak surcharges in market, and we continue to evaluate changes that we need to make based on demand and capacity. We implemented some changes on June 11, and we continue to monitor the environment.”

Jerry Hempstead, president of Hempstead Consulting, FedEx said that in order to “feed the beast,” surcharge increases are likely now be a permanent component of the cost to do business with them. 

“In complexity there is great profit,” he said. “It is very difficult for the average shipper to know what shipping is going to cost. There are just too many moving parts. Since capacity is limited and their major competitor is raising prices, both firms are emboldened to take the elevator up without much fear of losing market share.

Now is not a good time for shippers to ask either carrier to lower their price. Bringing attention to one’s deal may end up with a nasty surprise.”