FedEx Sticks With Its 2015 Forecast; Stock Slips Anyway
By Tom Giles and Mary Schlangenstein, Bloomberg News Analysis
Minutes after UPS sent its stock tumbling with a surprise warning that fourth-quarter profit was cut by surging costs, FedEx took an unusual step.
The competing package-delivery company issued a succinct statement meant to reassure investors: We’re sticking with our forecast for 2015 profit. FedEx Corp.’s per-share earnings will be $8.50 to $9 this year, same as the company said before. That assumes moderate economic growth and a modest benefit from falling fuel prices.
The message was clear. FedEx wants to avoid being compared with United Parcel Service Inc., which suffered after spending a fortune to ensure that packages get delivered on time during the year-end peak-demand season. Sure, UPS avoided the delays that marred the 2013 holiday. Even so, margins were crimped by all those increased expenses for a system that wasn’t fully utilized some days.
FedEx is different from UPS in key ways. It has a smaller domestic network than Atlanta-based UPS. It’s more focused on international markets, where air freight shipments have strengthened recently. FedEx also didn’t undertake as costly a network overhaul as UPS. Even if Memphis, Tennessee-based FedEx had its own cost overruns, the impact was blunted.
FedEx’s statement failed to reverse the slide in its shares, which slipped as much as 2.8% Jan. 23.
“Despite the fact that they came out and reiterated guidance, the stock is down in sympathy with what UPS said,” Jack Atkins, an analyst at Stephens Inc., said.
FedEx will get another shot at assuaging the market — and giving its stock a shot in the arm — March 18, when it’s scheduled to report quarterly results.
FedEx ranks No 2 and UPS ranks No. 1 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers.
