FedEx Cuts Outlook, Citing Bad Weather, Fuel Costs

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FedExFedEx Corp. (FDX) on Monday sharply cut its quarterly profit forecast, citing higher-than-expected fuel costs and severe winter weather that disrupted delivery operations in the U.S. and Europe.

The world's second-largest package delivery company now expects an adjusted profit of 70 to 90 cents per share for its fiscal third quarter, which ends Feb. 28. That's down from the company's earlier forecast for profit of 95 cents to $1.15 per share.

Analysts surveyed by FactSet expect FedEx to post a profit of $1.06 per share, on average.

The company's updated forecast assumes no further weather impact and stable fuel prices for the rest of the quarter. FedEx, based in Memphis, Tenn., said those factors also would affect its full-year financial forecast, which will be updated when the company reports third-quarter numbers on March 17.

FedEx has faced unusually high costs from winter storms, Chief Financial Officer Alan Graf Jr. said. Parts of the U.S. Northeast and Midwest have been hit by unusually heavy snow this winter, disrupting airport operations and ground travel. Ice and snow have hit areas as far south as Georgia and Texas.

Graf also said fuel costs have continued to rise since the company provided a financial forecast in mid-December. Jet fuel prices are up about 13 percent since then.

However, Graf said FedEx continues to see strength in its business across all of its transportation segments and geographic regions. The company and larger rival UPS are bellwethers of global economic health because they ship a wide variety of goods, which reflects the ups and downs of business and consumer spending.

FedEx cut its forecast after its shares fell $1.43, or about 1.5 percent, to close at $93.99. In after-market trading, the shares lost another 9 cents, to $93.90.

In its latest quarter, covering September through November, FedEx reported net income of $283 million, or 89 cents per share, down 18 percent from the same quarter a year earlier. The company said higher fuel costs were among the factors that hurt results.

Atlanta-based UPS released its last earnings report on Feb. 1, covering its fourth quarter, when its profit rose 48 percent over the year-ago quarter. The company projected its earnings for 2011 would rise 16 percent to 22 percent compared with 2010, and exceed pre-recession levels.


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