EarningsCenter

FedEx Delivers a Downbeat Economic Outlook, Cuts Its Earnings Forecast

FedexBy SAMANTHA BOMKAMP

NEW YORK (AP) - FedEx (FDX) says the global economy is stalling, and it's going to get worse next year.

The world's second largest package delivery company cut its forecast for the fiscal year ending in May, citing slow trade and high fuel prices that are hurting the economy.

A steep decline in Asian exports due to weakness in Europe is causing most of the pain. But consumers and businesses are also choosing to move goods more slowly to save money, which is hurting FedEx's core Express unit.

FedEx said its net income for the current quarter ending in November should fall well below last year's quarter.

The Memphis, Tenn. company also cut its forecast for the full to year to between $6.20 and $6.60 per share, from $6.90 to $7.40 previously. Shares of the company fell nearly 2 percent in early trading.

As the economy slows, FedEx is seeing a drop in demand for more expensive priority services. FedEx customers are chosing to move goods by ship or truck instead of by plane. FedEx hasn't been able to cut costs fast enough to match the decline in express demand.

Fear of a further economic slowdown is driving some of that behavior, but FedEx says steadily increasing fuel prices are also playing a big role.

"The world economy has absorbed an incredible increase in the price of fuel," CEO Fred Smith said on a conference call. "And that has had very big implications on the way people think about supply chains on their decisions to move by ocean or whether they move things by air."

This trend is having the most impact in the Express unit, where FedEx has already made cuts but plans to make more. It's reducing flights, taking planes out of service, and last month it offered buyouts to employees. Operating income in that unit, which is about double the size of any other, fell 28 percent in the first quarter. Revenue rose 1 percent as higher rates countered lower volume.

FedEx plans to announce a broad cost cutting plan for that unit next month, although it said that won't include layoffs.

For the current quarter, FedEx forecasts earnings of $1.30 to $1.45 per share, compared with $1.57 per share last year. That's well under analysts' forecasts. FedEx doesn't expect major technology product launches, like the recently announced iPhone 5, to be enough to make up for the slowdown elsewhere.

FedEx's forecasts are closely watched for signals of future economic health. Its results provide insight into the global economy because of the number of products it ships and the number of countries in which it does business.

In the three months that ended in August, FedEx Corp. earned $459 million, or $1.45 per share. That hit the top end of its recently lowered estimate. Revenue rose 3 percent to $10.79 billion. It earned $464 million, or $1.46 per share, on revenue of $10.52 billion in the same quarter a year ago.

The company's ground unit performed better in the first quarter as it benefited from those customers trading down. Operating income in the company's ground segment rose 9 percent on an 8 percent increase in revenue.



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adhos

Duh, Like you needed an MBA from Harvard to realize we are in the Obama economy where socialism and high taxes loom..???? Why would you expect anything less......except those watching MSNBC.

September 19 2012 at 4:36 PM Report abuse rate up rate down Reply
jahydroseed

Apparently Fred thinks that Hussien Obama is going to win in Nov.

September 19 2012 at 7:15 AM Report abuse rate up rate down Reply
Rod

What do get when you mix UPS & FedEx ---FED UP ! ! ! These two are nothing but over priced rip off companies anyway !

September 19 2012 at 1:45 AM Report abuse -2 rate up rate down Reply
2 replies to Rod's comment
ryanbrandner

------ Hey Rod,,, UPS built America and was always the cheapest to ship through for many many decades, unti l the global ecomomy collapsed and put the levels higher. Also you wonderful Post Office is not private and run bye the GOV and is exempt from licensing to having the treasury bail them out of everything possible. FEDEX copied everything from UPS to get started. --- Lastly,,, why don't you try to start a company like the founders did in UPS or FEDEX and we will see how far you last,,,, I bert you couldn,t buy a bicycle to bring a box from point A to point B..--- My name is Ryan and if you want to debate with me simply call me at ---715-748-9242,,, I will put you in your place,, trust me on that.

September 19 2012 at 9:51 AM Report abuse +1 rate up rate down Reply
polyglazepolyglaze

Hello Rod,, UPS started in 1907. When were you born? Next, what are the reasons shipping costs have gone up from any company? Maybe a unintellegent guy like you could figure that out, Read the comments below and a dummy like you might finally figure it out. PS, are you a liberal dope smoking hippy from wayback,,, if you are it's bye nature your just stupid. Polyglaze.

September 19 2012 at 10:10 AM Report abuse +1 rate up rate down Reply
spademan8

ten years ago there was bob hope,steve jobs and jonny cash
now theres no hope no jobs and no cash

September 18 2012 at 11:07 PM Report abuse +3 rate up rate down Reply
readingisknowing

Harleygent gets it We have a 2 tier economy one is government-financial-media the other the real economy As Government stopped putting in regulations to correct speculation (and even eliminating safe-guards) it began to "bail-out "prop-up" private financial and favored Corp "busts" with Public Funds CEOs saw this and wanted their piece of the Gold The markets will continue to suck up what the Fed gives with its low-rate policy and merrily come up with more and more financial gimmicks until no more money to be had Meanwhile well-paid jobs will continue to be shed in the real economy Pretty much follows script of Britain and others from the Renaissance capitalism til today When no jobs, matters not what wealth is brought in (see 16th Cent Spain)

September 18 2012 at 10:59 PM Report abuse +1 rate up rate down Reply
Harleygent

FedX , UPS, and our wonderful USPS have indicated declining business from past and current declines in business. Yet our wonderful stock market keeps climbing especially under significant lower transaction activity. Clear signs that the markets are being manipulated upward by someone or something(Computer programming). Oil and gasoline prices are at unsustainable levels with no drop in sight. With overall demand dropping their should be a drop in an over supplied market, yet no results there. Indications again are that things are being manipulated( George Soros). My recent restock trip to the grocery store sucked out $154.00 on exclusive sale items. Used to be a $60.00 weekly restock. Couldn't even buy peanut butter recently at $11.00 per 2 pack of Jiff now at $17.00. My government says there is no inflation, yet these companies are fighting their own inflation just like myself at the grocery stores. WASS(We Are So Screwed) my friends, it only going to get worse. Our government cannot continue trying too spend itself into prosperity without damaging all the middle class people who have work so hard for what little we have.

September 18 2012 at 10:16 PM Report abuse +4 rate up rate down Reply
mike_bovill

A Shout Out To:
Gates, Buffet ,Trump, Pickings, Winfrey, Ellison, Waltons, Koch, Bloomburg, Page, Brin, Ballmer and hundreds of other Billionaires..
Regarding Oil:
I challenge all of you and the many other billionaires in the United States to donate one billion dollars plus back into America.
I am a middle class Rhode Island worker that has been in the transportation field for over 20 years. I see first-hand what this country will experience in the near future unless some drastic steps are taken immediately. (Inflation) There is one thing and one thing only driving inflation and that is Oil.
Over the past 5 years I have witnessed what these trucking companies refer to as fuel surcharge. It began a few years ago when fuel prices began rising. The trucking companies instituted this fuel surcharge of what is now close to 29% of the cost of goods. Imagine a supermarket adding another 29% on a loaf of bread and every other item that goes into your shopping carriage. As gas prices continue to rise, so will everything else in this country. The increases are passed along to the consumer. Your average pay raise is 3% and fuel prices are rising 10 times that. It is out of balance and not sustainable.
When Mr. Obama was running for the Presidency, he gave a jaw dropping speech on how he was going to re-tool America and get the brightest minds together to move forward on alternative energy. Well, I have not seen this from him and am wondering if it is because the people in Washington—the Republican House of Representatives and the Democratic Senate—cannot agree if the glass is half full or half empty.
I challenge the billionaires of this country to get together and start (NASA 2) (The alternative energy company)
You are some of the brightest people this country has with the ability, the money and the business minds to create what would become the greatest company that this country has ever witnessed.
You all are extremely successful in your fields. We only want you to be willing to invest in the greatest company this country has even seen and watch the domino effect as you put millions of people back to work.
We are not looking to take all of your money, just invest a small portion to start. Does it matter if your portfolio states 40 billion or 30 billion (trust me you won’t know its missing)

Thank You
Michael Bovill

September 18 2012 at 8:27 PM Report abuse rate up rate down Reply
Richard

This is what happens when voters elect a socialist president who never heard of the private sector to be our c e o !!

September 18 2012 at 7:16 PM Report abuse +2 rate up rate down Reply
2 replies to Richard's comment
leoganz

Zzzzzzzzzzzzzzzzzzzzzzz....

September 18 2012 at 7:34 PM Report abuse -1 rate up rate down Reply
leoganz

Zzzzzzzzzzzzzzzzzzzzzzzzz..

September 19 2012 at 3:39 AM Report abuse -1 rate up rate down Reply
jmdeur

i remember the story from the early days of fedex, some driver found that he couldn't open a drop box, so he manhandled this huge box into his truck so the customers' boxes inside wouldn't miss their guaranteed delivery the next day. recently, i purchased a part needed to get my business back up and running. unfortunately, the vendor ticked the wrong box - home delivery instead of business delivery. the local fedex depot realized that the address was a business and not a home, so they worried that it might not be open for delivery on a sat. now, what they were supposed to do was contact the business to find out if it would be open - well, they didn't bother. they just marked it in their system as not be deliverable and gave up until the following tuesday (fedex home delivery doesn't work on mondays). i checked and saw the delivery exception and wasted an hour talking to various fedex employees on their 800 number. a few even lied to me about how they had checked - well i was here and no one called, our hours are on the internet, and no fedex truck stopped by. finally found their local depot number and was told that yes someone s c r e w e d up. when i asked why they couldn't move the box from the home delivery side to the business side so it could be delivered on monday, the answer was h e l l no. here's hoping they go belly up.

September 18 2012 at 6:49 PM Report abuse +1 rate up rate down Reply
jacqueline

oh great - FedEx goes out and UPS will have a monopoly - prices go up when gas goes up but don't go down when gas goes down - am paying twice as much for the same weight and size package as I did 10 years ago

September 18 2012 at 5:58 PM Report abuse +3 rate up rate down Reply