When FedEx announced last week its across-the-board earnings increases for the fourth quarter and another record fiscal year, one pattern emerged: revenue increased primarily due to increased package volume and higher base rates.
That sentiment is laced throughout the carrier’s news release.
- FedEx Express: “Revenue increased 7% primarily due to increased package volume, driven by international export growth of 5%, and higher base rates. Operating results increased primarily due to higher base rates, increased package volume, a positive net benefit from fuel and the continued benefit of cost management initiatives.”
- FedEx Ground: “Revenue increased due primarily to higher base rates and average daily package volume growth of 3%. Operating income increased due to higher yields and volume…”
- Full-Year Results: “Operating results benefited from higher base rates, increased volume…”
Looking ahead, FedEx will continue to focus on speed and automation, specifically by purchasing more airplanes and further investments in automation and expansion of capacity within the FedEx Ground division, according to EVP and CFO Alan B. Graf.
“Investments to modernize our aircraft fleet and expand our FedEx Ground capacity are supporting our strong earnings growth,” he said in the company’s statement. “We are very optimistic about fiscal 2018 as evidenced by our earnings outlook.”
When this latest news is added to its good fortune after previously reporting record peak season volume and a record fiscal year 2016, it’s clear business continues to boom for FedEx and the outlook is understandably sunny.
The message I’m left with is one of simple math: FedEx is shipping more packages and charging more to do it.
With 2018 General Rate Increase (GRI) announcements to come later this year, FedEx’s path to record profitability is well-defined and certain to include new and increased costs to you, the shipper.
Do you know how rate increases and new surcharges will affect your business?
I recommend being proactive to mitigate the impacts of increases and new surcharges. VeriShip’s Simulation Engine uses billions of data points, carrier benchmarking, and shipping profile trends to take guessing out of the process.