UPS United Parcel Service

By Laura Stevens and Josh Beckerman 

FedEx Corp. on Wednesday said that this year's peak holiday season is its busiest ever, and the pace has been consistent since Cyber Monday.

"There's no sign it's going to let up," FedEx Ground Chief Henry Maier said during the company's quarterly earnings call following the announcement of a 4% increase in profit for the quarter ended Nov. 30.

Company executives said that the boom in e-commerce has resulted in a higher than expected number of packages during this holiday season. On Monday, the company picked up more than 26 million packages globally, executives said, and demand has been particularly high in the Northeast.

Shares of the delivery company rose 5% to $156.25 in after-hours trading on the New York Stock Exchange, after the company beat Wall Street's expectations.

Some e-commerce shippers are doing better than others this holiday season, said Chief Executive Fred Smith. Some retailers hadn't done a good job of forecasting demand.

"The people that have the real problem in the e-commerce business by and large are those that view the transportation companies as some sort of utility or a vendor and they make some really, really bad decisions," Mr. Smith said. He didn't elaborate.

The FedEx executives said the company has been able to divert volume in the Northeast and that its technology in sorting hubs gives it a competitive advantage. The company also is running its network around the clock during the holidays. FedEx also is capping volume when necessary, which is likely to mean that those poor planners might not get all their packages shipped in time.

Additionally, despite rate increases designed to encourage retailers to ship smaller packages, oversize packages have accounted for a large slice of volume this year--nearly 10% of home deliveries. That will affect future pricing decisions, according to the company.

For the quarter, Ground's average daily volume rose 9%, while revenue increased 32% to $4.05 billion, in part due to the purchase of logistics provider Genco. The company said it would again invest $1.6 billion in its Ground network to accommodate growth next year, backing away from a plan to decrease spending going forward.

Both United Parcel Service Inc. and FedEx have been hoping to avoid a repeat of 2013, when millions of packages failed to reach their destinations in time for Christmas as online shoppers were placing orders at the last minute. Last year, UPS overran on costs as it staffed up too much for the holidays.

Previously, FedEx had said it expected volume to grow 12% to 317 million packages over the holidays. The executives Wednesday didn't quantify the increase in volume.

Separately, the company said its deal to acquire Dutch parcel firm TNT Express NV is on track. It expects final approval from European regulators in January, and for the deal to close in the first half of next year. It still needs approval from seven countries, including Brazil and China.

In addition, FedEx said it settled a dispute with former drivers regarding their employee status for $25 million net of taxes. FedEx has been involved in several class-action suits regarding its former practice of classifying some of its U.S. delivery drivers as independent contractors rather than employees. It stopped using the disputed model in 2011.

FedEx reported a profit of $691 million, or $2.44 a share, up from year-earlier earnings of $663 million, or $2.31 a share. Excluding certain items, profit rose to $2.58 a share from $2.16. Revenue increased 4% to $12.5 billion.

At the FedEx Express segment, revenue fell 6% to $6.59 billion as lower fuel surcharges and unfavorable currency rates more than offset base yield growth. However, operating income increased 26% to $622 million as executives said restructuring of that division to improve profitability was ahead of schedule.

In September, FedEx lowered its earnings guidance for the year, projecting weak demand in its freight segment and higher costs in its ground segment.

On Wednesday, it reaffirmed its outlook for adjusted earnings of $10.40 to $10.90 a share, "despite weakness in industrial production."

Write to Laura Stevens at laura.stevens@wsj.com and Josh Beckerman at josh.beckerman@wsj.com

(END) Dow Jones Newswires

December 16, 2015 22:46 ET (03:46 GMT)

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