FedEx Corp. reported fiscal third-quarter net income rose 18% to $692 million, or $2.51 per share, excluding one- time costs, powered by higher profits at its Express unit.
The company’s profit before interest and taxes at the Express unit rose 51% to $595 million from $393 million, but results were less favorable at the Ground and Freight units. Ground’s profit on that basis slipped $2 million to $557 million, and Freight’s results dipped 16% to $56 million. Revenue rose 8% to $12.7 billion, with all of the increase at the Ground unit.
“Our strong financial performance was driven by increasing demand for our broad portfolio of FedEx business solutions, which helped increase revenue and adjusted profit,” CEO and founder Frederick Smith said in a statement.
The one-time costs included $204 million to settle all of the 19 worker status cases in the appeals stage at the Ground unit. Those cases involve independent contractor status for workers and date back a decade or more. Fed Ex changed the independent contractor model several years ago.
The Express profit was helped by yield management and profit improvement efforts as well as 2% higher domestic volume as revenue dropped 1%.
At Ground, revenue rose 30% to $4.41 billion, reflecting the acquisition of logistics firm Genco and a different recognition approach for the SmartPost business. Ground profit was hurt by higher costs due to network expansion and holiday season demand that exceeded expectations and capacity.
Freight’s results worsened because of higher salary and benefit costs. Daily Freight shipments rose 7%.
FedEx, based in Memphis, Tennessee, showed earnings of $507 million, or $1.84, when the one-time costs were included. In the year-earlier period, net income was $586 million, or $2.03 per share, excluding a one-time gain.
An additional $92 million in one-time costs resulted from litigation and costs relating to the planned acquisition of Dutch company TNT Express.