FedEx Corp. (FDX) cut its earnings expectations for the fiscal year ending in May due to slowing global economic growth.
The outlook from the world's second biggest package delivery company may add to growing investor concern about the strength of the worldwide economy. It comes a day after the Federal Reserve gave a gloomy forecast for the U.S. economy.
The Memphis, Tenn. company said Thursday it now expects to earn between $6.25 and $6.75 per share for fiscal 2012, compared with a previous estimate of $6.35 to $6.85 per share. FactSet says analysts expect $6.39 per share.
For the fiscal first quarter that ended in August, FedEx Corp. says an increase in deliveries by truck offset a drop-off in shipments by air. Net income rose 22 percent to $464 million or $1.46 per share in the three-month period, compared with $380, or $1.20 per share, a year earlier.
Revenue rose 11 percent to $10.52 billion.
Analysts expected a profit of $1.46 per share on revenue of $10.32 billion.
Express shipments slowed most notably from Asia, where growth had been robust. FedEx said the slowdown in that segment outpaced its ability to cut costs, which it said it's doing aggressively to balance demand. As a result, Express unit operating income fell 19 percent, even as revenue rose 12 percent. Average daily express volume in the U.S. fell 3 percent. But revenue per package rose 13 percent as packages weighed more on average and FedEx tacked on higher fuel surcharges.
Operating income in FedEx's ground segment leaped 42 percent to $407 million. Revenue rose 16 percent to $2.28 billion. Average daily package volume grew 5 percent driven by an increase in shipments between businesses and FedEx home delivery service.
FedEx's freight segment, which hauls heavier shipments like refrigerators and car parts, posted an operating profit of $42 million compared with a loss of $16 million a year earlier. Revenue rose 6 percent.
When consumers and businesses are concerned about the strength of the economy, they tend to choose slower shipping options - like switching from overnight express service to slower ground shipping - to save money. It's the same move many made during the recession.
FedEx's larger rival United Parcel Service Inc. said last week that although it acknowledges that global growth is slowing, it's not forecasting another recession.
FedEx Cuts Fiscal Year Forecast on Slowing Growth