FedEx Corporation (FDX) Overcomes Labor Shortages and Supply Chain Disruption to Post Higher Second Quarter Operating Profit

Shares of FedEx Corporation (FDX) rose 6.5% today after the company, the world’s largest express parcel provider, released financial results for the quarter ended Nov. 30.

The company posted operating income of $ 1.6 billion, up 9% year-over-year.

Diluted EPS was $ 3.88, down $ 0.67 due to an accumulated tax benefit in the same quarter last year.

Higher operating profit

Michael C. Lenz, executive vice president and chief financial officer of FedEx Corp., attributed the growth in the company’s operating profit to “strong revenue growth and effective management of costs and expected challenges in availability of labor ”.

However, FedEx revealed that rising revenue per shipment across all transportation segments was the main driver of the company’s operating profit increase.

FedEx Freight posted the biggest gains, with operating profit up 33% year-on-year.

Revenue per shipment increased 14% and average daily shipments increased 3% in the quarter.

FedEx was also helped by higher yields and volume growth from FedEx International Priority, which “more than offset the negative effects of persistent staffing issues and inefficiencies in the airline system linked to COVID-19.”

Labor shortages

FedEx Ground faced a number of challenges during the quarter, including those related to the job market.

The company revealed that FedEx Ground was facing “increased purchased transportation costs, higher wage rates and network inefficiencies due to staff shortages, which negatively affected year-over-year results. other of about $ 285 million “.

However, Raj Subramaniam, president and COO of FedEx Corp., said the company was able to weather the storm with “strategic investments in FedEx networks and systems that have enabled us to provide critical delivery capability and supply chain expertise to support the needs of our customers, while allowing us to capitalize on the growing e-commerce parcel market. “

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