FedEx lifts its earnings target
FedEx, the package delivery company, increased its full-year earnings target and said the economic outlook remained stable, after announcing a 35 per cent rise in third-quarter profits.
The better-than-expected results were driven by strong growth in US ground deliveries during the busy Christmas holiday season and continued expansion in its international express business.
FedEx has been among the best performers in the transportation sector during recent years as global trade increases and manufacturers and retailers shift towards just-in-time supply chains.
Fred Smith, chief executive, said the world economy remained robust, and predicted US growth of 3.2 per cent during the company’s 2007 fiscal year, which begins in June.
Mr Smith said FedEx remained on the lookout for acquisitions as the global transport and logistics industry consolidated. But he said the company would not be rushed into deals.
“We’re not going to overpay for something because it simply destroys shareholder value and we need to make sure there is a great synergy,” he said.
UPS, the largest US parcel courier, and Deutsche Post, which owns DHL, have both made a series of acquisitions in the logistics and freight forwarding markets but FedEx has remained focused on package delivery.
FedEx lags behind DHL, UPS and Dutch-owned TNT in European domestic markets, leading some analysts to predict the company could make an acquisition there.
Net profits for the quarter ended February 28 were Dollars 428m, or Dollars 1.38 a share, compared with Dollars 317m, or Dollars 1.03 a share, in the same period last year. The results easily exceeded Wall Street’s consensus forecast of Dollars 1.30 a share.
FedEx upped its earnings forecast for 2006 to a range of Dollars 5.66-Dollars 5.81 a share, from its previous target ofDollars 5.45-Dollars 5.70. Total third-quarter sales rose 9 per cent to Dollars 8bn.
Revenues from domestic ground deliveries rose 14 per cent to Dollars 1.4bn, while the express air network enjoyed a 9 per cent jump to Dollars 5.3bn. The strongest express growth came from Asia and Europe, lifting international revenues by 12 per cent.
Sales at FedEx Freight, the company’s domestic trucking business, rose 14 per cent to Dollars 848m. The biggest disappointment was a 36 per cent decline in operating income from the FedEx Kinko’s retail chain, which provides parcel shipping services and office supplies.
