FedEx Corp reported a higher-than-expected quarterly profit and is updating its fleet with 27 new fuel-efficient Boeing aircraft to cut costs, driving its shares up as much as 5 percent. The company also said it is deferring delivery of some Boeing freighter aircraft, adjusting for slowing volume out of Asia.
FedEx expects continued moderate economic growth, with trade flows staying volatile, executives told analysts on a conference call after the company reported results on Thursday. The Boeing purchase is a cost-effective move to handle medium-haul domestic to intercontinental routes, Sterne Agee Managing Director Jeffrey Kauffman said.
FedEx delivered about 17 million packages on December 12, its busiest day in its 40-year history and twice the average daily shipments, driven by online holiday orders. The world's No 2 package delivery company reported fiscal second-quarter net profit of $497 million, or $1.57 per share, up from $283 million, or 89 cents per share, a year ago.
Revenue rose 10 percent to $10.59 billion. Analysts, on average, expected revenue would rise to $10.61 billion, according to Thomson Reuters I/B/E/S. The massive volume of goods moved by FedEx make its shipping trends a bellwether of consumer demand and the economic climate. The value of packages that it handles in its trucks and planes each is equivalent to about 4 percent of US gross domestic product and 1.5 percent of global GDP. FedEx Express has signed an agreement with Boeing Co to buy 27 new 767-300F aircraft, replacing some that are more than 40 years old.
The company said the 767s will provide similar capacity as the MD10s being retired, with about 30 percent more fuel efficiency and a minimum 20 percent reduction in unit operating costs. Three of the planes will arrive in fiscal 2014, then six per year between 2015 to 2018. FedEx Express is also delaying the delivery of 11 777F aircraft, reducing capital spending and adjusting to slowing volumes out of Asia.