FedEx Corp. :FDX-US: Earnings Analysis: Q3, 2017 By the Numbers : March 24, 2017

FedEx Corp. reports financial results for the quarter ended February 28, 2017.

We analyze the earnings along side the following peers of FedEx Corp. – United Parcel Service, Inc. Class B, Deutsche Post AG Sponsored ADR, Expeditors International of Washington, Inc., C.H. Robinson Worldwide, Inc., Air Transport Services Group, Inc. and PostNL NV Sponsored ADR (UPS-US, DPSGY-US, EXPD-US, CHRW-US, ATSG-US and PNLYY-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 14997 million, Net Earnings of USD 561 million.
  • Gross margins narrowed from 22.69% to 21.24% compared to the same period last year, operating (EBITDA) margins now 12.44% from 13.88%.
  • Year-on-year change in operating cash flow of -99.25% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings rose compared to same period last year, despite decline in operating and pretax margins.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-02-28 2016-11-30 2016-08-31 2016-05-31 2016-02-29
Relevant Numbers (Quarterly)
Revenues (mil) 14997 14931 14663 12979 12654
Revenue Growth (%YOY) 18.52 19.9 19.42 7.14 8.01
Earnings (mil) 561 700 714 -70 506
Earnings Growth (%YOY) 10.87 1.45 3.33 90.68 -12.61
Net Margin (%) 3.74 4.69 4.87 -0.54 4
EPS 2.07 2.59 2.65 -0.26 1.84
Return on Equity (%) 15.1 19.53 20.45 -1.99 13.81
Return on Assets (%) 4.82 6.09 6.23 -0.67 5.31

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Market Share Versus Profits

Revenues History
Earnings History

FDX-US‘s change in revenue this period compared to the same period last year of 18.52% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that FDX-US is holding onto its market share. Also, for comparison purposes, revenues changed by 0.44% and earnings by -19.86% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 21.24% to 22.69% for the same period last year, while operating margins (EBITDA margins) went from 12.44% to 13.88% over the same time frame.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

FDX-US‘s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 26.50 days from 34.16 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

FDX-US‘s change in operating cash flow of -99.25% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


Despite a decline in operating (EBIT) margins as well as a decline in pretax margins, the company’s earnings rose.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

FedEx Corp. engages in the provision of a portfolio of transportation, e-commerce, and business services. It operates through the following business segments: FedEx Express, TNT Express, FedEx Ground, FedEx Freight, and FedEx Services. The FedEx Express segment focuses on time-definite delivery across countries and territories. The TNT Express deals with international small-package ground delivery and freight transportation. The FedEx Ground segment engages in the provision of small-package ground delivery services to any business address in the United States and Canada. The FedEx Freight segment includes the provision of less-than-truckload freight services across all lengths of haul. The FedEx Services segment focuses on the provision of sales, marketing, information technology, communications, and back-office support to other companies in the FedEx Group. The company was founded by Frederick Wallace Smith on June 18, 1971 and is headquartered in Memphis, TN.

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