Earnings Preview: FedEx Corp
FedEx Corp. has been hit hard by higher fuel costs compared with last year, analysts say. Also tougher freight environment, including slowdowns in trucking and rails should hamper the company’s results for the quarter.
During the quarter, FedEx’s Canadian subsidiary unveiled its headquarters and a 48-dock Toronto service center. The subsidiary, FedEx Freight Canada, began operations in February.
In May, the company’s Express division said it was working with Azure Dynamics Corp. to add to its fleet of hybrid-electric delivery vehicles. The same month, the company also increased its quarterly dividend by 11 percent to 10 cents per share.
The company operates four divisions: FedEx Express, FedEx Freight, FedEx Ground and FedEx Kinko’s, and posted annual revenue of $32.3 billion in 2006.
BY THE NUMBERS:
The company is predicting earnings per share for the fourth quarter between $1.93 and $2.08, and full-year earnings of $6.45 to $6.60 per share. Full-year earnings per share include the impact of costs associated with a pilot labor contract. Excluding those charges, the company expects to see earnings of $6.70 to $6.85 per share.
Analysts expect a quarterly profit of $1.98 per share, according to a poll by Thomson Financial, and full-year earnings per share of $6.76.
ANALYST TAKE:
In a note to investors, Bear Stearns analyst Edward Wolfe on Monday said he expects FedEx to report fourth-quarter results below Wall Street’s consensus, due to the weak freight economy and increasing fuel costs. He reduced his own earnings per share estimate to $1.85 from $1.98, and expects full-year earnings per share at $6.62.
Wolfe said the company’s international small package business has slowed in the first half of the fiscal year after a slowdown in the trucking industry and reduced rail volumes.
Comparatively, United Parcel Service Inc., the company’s chief competitor, in May reported a 13.5 percent decrease in first-quarter profit. Officials with UPS also cited trouble in their small package business during the year, but the world’s largest shipping carrier said in March it does expect earnings per share growth of 6 percent to 10 percent for 2007.
STOCK PERFORMANCE:
FedEx shares fell nearly 4 percent during the quarter. The stock hit its 52-week high on Feb. 26, and has slowly declined since to close Monday at $109.92.
