FedEx sees 'extremely difficult' environment
Filed under: Company News, Earnings
Stung by the economic recession, FedEx Corp. (FDX) today reported a fiscal fourth quarter loss and spooked investors by giving lackluster guidance.The net loss was $876 million, or $2.82 per share, for the fourth quarter ended May 31, down from a loss of $241 million, or 78 cents a year earlier. Revenue at the Memphis-based company fell 20 percent to $7.85 billion. Excluding non-cash charges totaling about $1.2 billion, or $3.46 per share, earnings would have been 64 cents. On that basis, FedEx was expected to earn 52 cents a share on revenue of $8.4 billion, according to analysts surveyed by Thomson Reuters.
Revenue from FedEx Ground fell 1 percent to $1.7 billion, while operating income was flat at $203 million. FedEx Freight posted an operating loss of $106 million. Revenue was $948 million, down 28 percent from last year's $1.31 billion. Revenue at FedEx Services fell 13 percent to $478 million.
Shares of FedEx, down about 20 percent this year, fell in pre-market trading. Wall Street sees FedEx as a proxy for the overall economy which many expect will move out of a recession by September. There are caveats, however, including predictions that unemployment will hit double-digits before Labor Day.
FedEx, which announced the layoff of 1,000 workers in April, is forecasting first quarter earnings of 30 cents to 45 cents per share, compared with $1.23 a year earlier. Wall Street had expected FedEx to earn 68 cents on revenue of $8.63 billion, according to Thomson Reuters. This outlook from FedEx "assumes current fuel prices and a stable economic environment," which given the expected rise in oil prices may be wishful thinking.
"The operating environment for our first two quarters in fiscal 2010 is expected to be extremely difficult," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer, in the press release. "Manufacturing activity is expected to be substantially negative year over year through the summer and last year's first quarter results benefited from stronger economic activity, making earnings comparisons difficult."
The company was unable to give a forecast for annual earnings given the uncertainty about fuel prices.
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Reader Comments (Page 1 of 1)
6-17-2009 @ 9:48AM
Steve said...
If you have any thoughts of an economic recovery already begun, look here, when the real economy picks up, shipping picks up. Simple formula that many economists don`t see.
Add on higher fuel costs when people can`t afford it and there you go, an extended recession. Don`t forget, many of us that have been able to keep our jobs, have also taken substantial pay cuts. The pricing of oil that is not based on supply and demand but on speculation, is hurting us all beyond repair.
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6-20-2009 @ 12:17AM
frontline1957 said...
What is meant by difficult times for fedex?
6-17-2009 @ 10:51AM
Mike said...
"FedEx sees 'extremely difficult' environment"
---2010 is going to "extremely difficult" period. If you're on the "green shoot" or "bottom" boat...I suggest you choose a raft.
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6-17-2009 @ 12:07PM
Bone said...
How can Fed-Ex continure to give away millions to already rich pro golfers, such as Tiger Woods, while cutting their employees' retirement funds? Now, they are loosing millions. The winner of last years Fed-Ex cup got 10 million alone plus whatever the runners-up got also.
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6-17-2009 @ 11:58AM
KulJav said...
I understand that economists want us to start spending to kick start the economy. That is the key to a recovery. You can throw all the money you want at these corporations and you do not get the recovery you want. GM and Chrysler took the money and they went bankrupt. The big banks are tired of the government regulating them and wish they never took the money. The key is with the consumer. If anyone, however, believes that the worst is over and we will see positive numbers as early as September you are set for a major let-down. With unemployment rising and many employees taking cuts, how can the economy recover? It scares everyone to think that what they have now can be gone tomorrow so they hold off on big purchase items. The cycle has just begun. Obama should spend his money on producing new ideas and selling them to the world. New technology and an end to the service sector has come.
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6-17-2009 @ 12:03PM
algon said...
"There are signs that the worst of the recession is behind us and we remain optimistic that we will see quarter-over-quarter economic improvement later this calendar year." This is very wishful thinking on the part of FedEx, but the worst is still in the pipeline. TARP money is going back to the government, and not being used to ease the credit markets. Corporations are cutting back on spending, laying off workers, and people are falling behind on mortgages. Both residental and business shipping will fall further, as the economy continues to contract.
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6-17-2009 @ 12:43PM
dccwest said...
Anyone who drives up and down the Interstates notices that fewer delivery trucks are out there. It seems that since everything is made offshore, the only big freight movement is from the Ports to the US buyers. Intra USA "B to B" freight is dying.
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6-17-2009 @ 12:43PM
KP said...
I agree with previous articles that FEDEX is a reliable indicator on the state of our economy for obvious reasons. McDonalds is a good indicator also when combined with FEDEX's performance both having an inverse relationship with each other. Ideally, FEDEX sales/profits rising while MCD's declines or flattens should occur if our economy is back on track again.
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6-17-2009 @ 12:52PM
AL said...
The economy is in bad shape and yet the CEO's and upper management positions still have not taken the cuts they ought to have been forced to take. People are sick of the damn greed of upper management and look at Wall Street, the banks, Chysler, GM etc. GREED people is killing this country. Oil is rising because of the speculators and again, it's GREED. Buy anything? Why? Oh, that's right, it helps out the rich. Not off of me.
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6-17-2009 @ 2:38PM
G.King said...
Bone is right. BTW, Fed Ex is non-union to start with...so the excuse of workers pay being too much won't work-layoffs for lack of business is one thing but too many companies try to use worker compensation as a main fault. Fed Ex having reamed worker pay won't help. Big lie exposed again.
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6-17-2009 @ 6:41PM
rik said...
When the govt steps out of the way of business, banks, car companies, and competition that is not subsidized takes place, here's what will happen, the free market will start to grow, jobs will happen, interest rates will be lower, homes will sell, be built too, cars will sell, more fuel efficient because that's what we need, fuel prices will fall if we cut our demand, companies that go away are for the most part obsolete and what they do is being done by others cheaper, the average american worker needs to get their affairs-debt under control, cut up the credit cards, buy what you can pay for and live within your means, it worked for our parents, it will work for the rest of us too. Debt will bury the debtor, always 100 percent of the time something happens that was not planned for, and yes, whip out the credit cards and keep digging the hole deeper.
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6-26-2009 @ 6:11AM
jill said...
I work for Fedex and I see the cuts that are being made every day. All of the top managers took paycuts to help keep the hourly employees from being out of job. I have been with Fedex for 10 years i have seen the changes and I am very proud to work for a great company. It is hard work and not everyone can handle it. Fred Smith is a very smart man.
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