FedEx Earnings: Top-Line Trends Still Sluggish, but Express Margins Show Promise

FedEx's fiscal third-quarter (ended February) top line fell 2% year over year, driven by lingering US package (and airfreight) volume declines at express, the sluggish underlying demand backdrop for freight's less-than-truckload operations, and lower fuel surcharges. Express' volume declines stem from muted retailer restocking, soft industrial end markets globally, and lost business from the United States Postal Service, which has tweaked its delivery strategy (using less of FedEx's air capacity). Ground revenue was roughly flat as volumes and yields were flat. On the positive side, core pricing appears to be holding up across the board and total revenue was mostly in line with our expectations.