Memphis-based shipping giant FedEx recorded a 12% drop in net income of $438 million in the second quarter of 2013, a 12% decrease from $497 million in the same period a year earlier. FedEx's 2013 fiscal year began on 1 June 2012.
Total revenue in the second quarter increased 5% to $11.1 billion for each of its operating segments. Capital expenditures fell 17% to $916 million in the second quarter.
Operating income decreased 8% to $718 million in the quarter, down from $780 million a year earlier. Operating expenses increased $10.4 billion in the quarter, and operating margins fell to 6.5% from 7.4% in the previous year.
FedEx reported earnings of $1.39 per diluted share for the second quarter, compared with $1.57 per share in the same quarter in 2011. The impact of Superstorm Sandy impacted earnings by $0.11 per diluted share. The company expects third quarter earnings to be between $1.25 and $1.45 per diluted share.
FedEx's Express segment reported $6.86 billion in revenue for the quarter, up 4% from $6.58 billion in the same period of 2011. Operating income in the segment was down 33% to $230 million from $342 million a year earlier. Operating margins for Express fell to 3.4% compared to 5.2% in the same quarter a year earlier.
The rise in Express revenues reflects growth and acquisition within the FedEx Trade Networks freight forwarding services arm, the company says, but core revenue growth was stifled by the global economic environment and Superstorm Sandy's impact.
Revenue for US domestic shipments per package grew 1%, and domestic average daily package volume fell by 2%. Average daily package volume for international exports grew by 6% due to increased FedEx international economy shipments in Europe and Asia, as well as increased international priority shipments in Asia. Revenue from international exports per package fell 4% because of customers' shifting demand towards international services with lower yields, as well as lower fuel surcharges.
FedEx unveiled a programme in October to see $1.7 billion in annual profit improvements through fiscal 2016, with a majority of the savings coming from the Express segment. The company will begin to see those savings in fiscal 2014 with a "significant" portion of the improvements realised by the end of fiscal 2015, says chief financial officer Alan Graf on a 19 December analyst call.