FedEx Corp. (NYSE:FDX) predicted that income would rise for the year after seeing the results of its fiscal first quarter. It now expects adjusted earnings to be $10.85 to $11.35 a share for fiscal 2017, compared with $10.80 in fiscal 2016. The package-delivery company said that it earned $715 million in the latest quarter, up 3 percent from the year before.
Revenue in the quarter ended Aug. 31 rose to $14.7 billion from $12.3 billion a year earlier. Excluding certain one-time items, adjusted per-share earnings rose to $2.90 a share. Analysts polled by Thomson Reuters had projected adjusted per-share profit of $2.81 on $14.61 billion in revenue.
The results were helped by higher base prices on FedEx express and ground services and higher volume in the ground-shipping business. Operating margins at its express unit rose to 9.4 percent, up from 8.3 percent in the same quarter a year earlier. The company reported a 1 percent increase in domestic and international package volume. Margins at the company’s ground unit increased to 14.2 percent from 14.0 percent. Volume grew 10 percent.
FedEx scaled back its broader economic growth outlook. FedEx now expects U.S. gross domestic product to expand 1.6 percent this year, down from its earlier 1.8 percent forecast. For global GDP, the company now expects an expansion of 2.2 percent, compared with 2.3 percent in its previous forecast.
FedEx expects another record shipping season during the peak holiday period. The company reports that it plans to hire more than 50,000 seasonal workers for the peak holiday shopping season. That is about 5,000 less than last year.
FedEx also announced that it will raise shipping rates on Jan. 2. Ground-shipping, home-delivery and freight rates will increase by an average of 4.9 percent. Express rates for packages sent within, from or to the U.S. will increase by an average 3.9 percent. The cost of sending bulky and extremely long packages will also rise.
FedEx recently acquired Dutch parcel delivery company TNT Express NV in May for about $5 billion. The company estimates that the integration would take four years at an aggregate cost of $700 million to $800 million. Costs from TNT’s integration and restructuring program decreased earnings by 17 cents a share in the first quarter.
FedEx estimated adjusted earnings for 2017 would see a negative effect of $1 a share from its acquisition of TNT. Chief Financial Officer Alan Graf says that TNT would boost FedEx’s earnings by fiscal 2018. Annual synergies related to the TNT deal should total $750 million starting in fiscal 2020, according to FedEx.