FedEx Corp. (NYSE: FDX) posted fiscal second-quarter earnings that miss analysts’ estimates as the company was spending more to expand its business. The package delivery giant said Tuesday that the company earned $700 million, or $2.59 a share, in the quarter ended Nov.30. That missed Wall Street expectation of $2.91 a share. The company said increased expenses and acquisition costs of purchasing TNT Express NV in May hurt the earnings.
The operating profit margin fell in both FedEx Ground and FedEx Freight segment. Margins in ground segment fell 2.5 percent in the quarter even though the ground revenue increased 9 percent year-over-year. That’s because expenses outpaced revenue. The company spent about $2 billion this year to open new facilities and distribution centers and it also hired more employees to handle higher daily package volumes. The margin in freight segment was lower due to higher information technology expenses. Over all, company’s operating margin fell to 7.8 percent from 9.1 percent a year earlier.
“E-commerce continues to drive revenue growth which provides great opportunities as well as significant challenges,” said Alan Graf, the company’s finance chief. The shares fell 2.56 percent to $193.65 in the early trading as the results disappointed investors. The stock had gained 33 percent this year.
Total revenue increased 19.2 percent to $14.9 billion in the quarter. The company remained its earnings outlook for 2017 from $11.85 to $12.35 per share. “After growing just 1.6 percent in calendar 16, we expect U.S. GDP growth of 2.2 percent in calendar 17, anchored by continued robust consumer spending and strong business investment,” outgoing Executive Vice President Mike Glen said on the conference call.