FedEx delivered fiscal second-quarter earnings Tuesday that missed Wall Street expectations, while barely beating on revenue.
Shares of the shipping company fell more than 3 percent as FedEx reported adjusted earnings of $2.80 a share on revenues of $14.93 billion. The company's full-year adjusted earnings outlook for 2017 remained unchanged at between $11.85 to $12.35 per share.
Daily package volumes for its ground business segment increased 5 percent during the quarter, driven by e-commerce and commercial package growth. The segment's revenue increased 9 percent year-over-year, but ground margins fell 2.5 percent as the company scrambled to increase its capacity by opening new facilities and bringing in more employees.
Its freight segment reported a 3 percent year-over-year increase in revenue, but a 1 percent drop in operating margin due to a lower average weight per shipment and increased information technology expenses. In its conference call, the company said its making major systems investments in the segment which will result in "significant margin improvement by fiscal-year 2020."
In the news release, Chairman and CEO Fred Smith said the company is "in the home stretch" of its peak shipping season, noting that service levels are high. The company said its seen multiple days of volume that approach or surpass double its daily average.
Looking ahead to next year, the company said it sees moderate growth in the global economy.
"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.
Analysts expected the company to post earnings of $2.90 a share on $14.92 billion in revenue, according to a Thomson Reuters consensus estimate.