Analyst Note| Matthew Young |
FedEx's fiscal first-quarter (ended August) revenue fell 7% year over year on persistent volume declines and falling yields at express, along with normalizing less-than-truckload, or LTL, tonnage at freight. Express' softer package activity stems in part from muted retail sector restocking and lost business from the United States Postal Service, which recently tweaked its delivery strategy. Revenue came in slightly shy of our expectations due mostly to yield pressure at express—including the steep correction in demand-driven surcharges. That said, express' volume declines are easing, core pricing at ground still looks healthy, and ground volume trends flipped positive (up 0.6%) on easier comps and as customers diverted shipments away from UPS due to the Teamsters strike threat.