(Reuters) – Package delivery company FedEx Corp on Tuesday reported a better-than-expected quarterly net profit due to strong global demand and increased volumes during the peak holiday shipping season, but said its results were hit by lingering effects from a June cyber attack on its Dutch TNT Express unit.
The Memphis-based company, often considered a bellwether for the U.S. economy, as is its rival United Parcel Service Inc, said the cyber attack cut $0.31 per diluted share from its fiscal second-quarter profit.
FedEx increased its costs associated with its acquisition of TNT Express through fiscal 2020 to roughly $1.4 billion from the $800 million. FedEx acquired TNT Express last year for $4.8 billion.
Shares of the company rose 0.8 percent in after-hours trading following the results.
FedEx Chief Executive Officer Fred Smith said the company was seeing strong demand during the peak holiday shipping season, which began with the U.S. Thanksgiving holiday and extends through the New Year.
“We are on track for another record holiday-shipping season, and customer-service levels have been outstanding,” Smith said in a statement accompanying the results.
Edward Jones analyst Logan Purk said FedEx “clearly exceeded expectations on the earnings front,” but “there might be some push-back in regards to the increased integration costs with TNT and the overall flat profitability in its ground (small-package delivery services) segment.”
FedEx and UPS have spent billions of dollars on upgrading their networks to handle rapidly rising e-commerce package volumes, particularly in the weeks leading up to Christmas.
The company has been grappling with lower margins on its e-commerce business, as deliveries to individual homes are typically more expensive than deliveries to businesses that often get several packages at once.
FedEx’s results also reflect a tax benefit of approximately $80 million from foreign tax credits associated with a dividend paid from foreign operations, and a favourable net impact from fuel, the company said.
FedEx posted fiscal second-quarter net income of $775 million, or $2.84 per share, up from $700 million, or $2.59 per share, a year earlier. Adjusted for one-time items, it reported earnings per share of $3.18, beating analysts’ expectations of $2.89 per share.
FedEx said excluding mark-to-market pension accounting adjustments, expenses related to its TNT Express acquisition and certain legal issues, it expects full-year fiscal 2018 earnings per share in a range from $12.70 to $13.30. In September, it gave a range of $11.05 to $11.85.
Analysts had forecast earnings of $12.45 per share for the full fiscal year.
