Business & Finance

FedEx Benefits From Higher Shipping Rates, Fuel Surcharges

FedEx Benefits From Higher Shipping Rates, Fuel Surcharges #FedEx #Benefits #Higher #Shipping #Rates #Fuel #Surcharges Welcome to Lopoid

FedEx Corp.’s

revenue rose 8% in its fourth quarter as higher shipping rates and fuel surcharges offset a smaller volume of packages shipped.

The delivery giant’s operating income rose 6.7% from a year earlier to $1.9 billion, led by its Freight and Express units, where operating income rose 67% and 20%, respectively.

The company’s Ground division fared worse because of higher costs from insurance, wages and payments for transportation. Operating income from its Ground unit fell 23%.

FedEx said its fourth quarter net income included a tax benefit of $46 million.

The Memphis-based company said its operations continue to be constrained by the effects of supply-chain disruptions, slower economic growth and a tight labor market. FedEx, like other shipping companies, has raised wages to attract and retain workers. Earlier in the pandemic the company made investments to expand its capacity to handle a larger volume of packages.

Every day, millions of sailors, truck drivers, longshoremen, warehouse workers and delivery drivers keep mountains of goods moving into stores and homes to meet consumers’ increasing expectations of convenience. But this complex movement of goods underpinning the global economy is far more vulnerable than many imagined. Photo illustration: Adele Morgan

FedEx raised its fuel surcharge fee multiple times across its shipping services since March to cover swings in fuel prices. Prices of diesel, which is used in heavy-duty trucks, have risen nearly 40% since the end of February.

The company plans to spend $6.8 billion in the fiscal year starting in June, giving priority to investments to improve efficiency, modernize its fleet and facilities and increase automation.

Shares gained 2.7% in after-hours trading.

FedEx executives said on an earnings call on Thursday that they will be able to adjust their networks and capacity if the economy softens, including curbing flights if demand drops.

Overall, FedEx shipped on average 15.2 million parcels a day in the three months ended May 31, compared with 16.4 million in the prior-year quarter. While the volume of e-commerce packages has waned from the pandemic surge, FedEx said it still projects continued growth in the sector.

The fourth quarter was FedEx founder

Fred Smith’s

final one serving as the company’s chief executive after decades in the role. Raj Subramaniam, who had been president and operating chief, took over June 1 as CEO.

Last week, FedEx added two new board members and pledged to add a third in an agreement with hedge fund D.E. Shaw. FedEx also raised its quarterly dividend and changed its executive compensation plan to tie bonus payments to the company’s total shareholder return.

FedEx is also facing tensions with its Ground contractors, which are small businesses that deliver all of the packages in that division. Many contractors have said they are struggling to handle higher costs on everything from wages to fuel and that FedEx isn’t doing enough to support their operations. FedEx has said previously that it has a per-stop fuel payment that is adjusted based on the local price of fuel, but contractors said that doesn’t keep up when fuel prices rise rapidly.

Write to Esther Fung at esther.fung@wsj.com

Corrections & Amplifications
FedEx’s operating income rose 6.7% from a year earlier to $1.9 billion. An earlier version of this article incorrectly said profit rose by that amount. (Corrected on June 23.)

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the June 24, 2022, print edition as ‘Higher Shipping Rates Lift FedEx.’

Click Here To Continue Reading from Source

Related Articles

Back to top button