By Jonathan S. Reiskin, Associate Editor
This story appears in the Sept. 10 print edition of Transport Topics.
FedEx Corp. said its earnings for the three months ended Aug. 31 will probably decline by 4.1% from last year’s comparable quarter, “as weakness in the global economy constrained revenue growth” at its Express division.
FedEx said Sept. 4 it expects quarterly earnings of $1.37 to $1.43 a share, compared with $1.46 a share in the year-ago quarter.
The new estimate is 8.2% lower than the previous range of $1.45 to $1.60. FedEx, Memphis, Tenn., will report earnings for its fiscal first quarter on Sept. 18.
In June, FedEx reported higher profits before one-time charges for its fiscal fourth quarter ended May 31 (6-25, p. 2). Better results from its ground-based parcel and less-than-truckload units overshadowed declines at FedEx Express, which uses aircraft to transport parcels and general freight.
Analysts had predicted adjusted profit in the quarter would be $1.56 a share, based on the average of 23 estimates compiled by Bloomberg News. They already had lowered their projections from earlier in the year. The average for the quarter was $1.70 a share before FedEx’s outlook statement in June.
Company management also said during the June report they expected profits to rise in the 2012-13 fiscal year from the prior year. At the same time, however, executives said they would begin cutting expenses.
Since the prior quarterly report, FedEx has taken action to reduce costs. In August, the company said it planned to offer voluntary buyouts to employees in the Express and Services divisions (8-20, p. 6).
“The miss looks like it was due more to international express weakness than domestic, but it all ties into the same global network,” analyst David Ross wrote to clients of Stifel, Nicolaus & Co. after the FedEx announcement.
“The company had been banking, in our view, on international packages traveling in the domestic network — the domestic portion of the international journey . . . and it hasn’t happened — which is why they’re now talking about restructuring,” Ross said.
A slump in Europe and slowing growth in Asia may have exposed a weakness of FedEx’s express business, which was built around customers willing to pay more for speed of delivery, said analysts from Sanford C. Bernstein & Co. and Raymond James & Associates Inc.
FedEx ranks No. 2 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers. Rival UPS Inc. ranks No. 1.
