FedEx net off in 3Q
FedEx Corp. said earnings slid five percent in the third quarter, and warned that “market conditions have deteriorated” more than was expected just a few months ago.
The company does, however, expect international priority traffic to grow five to seven percent during the fourth fiscal quarter that began March 1, a sign that overseas markets are still expanding despite the stagnant U.S. economy. FedEx also expects express domestic volume to fall by one to two percent.
The express provider earned $.37 per share in the third quarter of fiscal 2001, compared to $.39 for the year-ago quarter. Net income totaled $109 million on revenue of $4.8 billion, down four percent from net income of $113 million on sales of $4.5 billion in fiscal 2000.
“Economic conditions worsened throughout the quarter,” said Alan B. Graf Jr., FedEx’s executive vice president and chief financial officer, in a conference call with reporters.
Current shipping levels “match the patterns” that occurred during the 1990-91 recession, “Growth rates were lower than anticipated as economic growth during the quarter evaporated,” Graf said.
Graf said the company’s original forecast for the six months beginning Dec. 1 “assumed a soft economic landing. However, market conditions have deteriorated more than we anticipated, as reflected by numerous news accounts of earnings warnings and layoffs, particularly in the auto and high-tech sectors.”
There are signs that tougher times may be ahead, as Graf said volume growth, yield growth and weights for February dropped noticeably for all of the FedEx operating units.
Graf also noted that Asian growth rates for its premium international priority service “have significantly slowed” from 26% in the quarter ended Aug. 31, to 7% in the quarter just ended. European growth, however, remained strong at 25% above year-ago levels.
Some customers have indicated a possible order pickup in the fourth quarter, he said.
FedEx remains bullish about the long-term view.
“We love this economy long-term,” one FedEx official said during the conference call.
Analysts praised the FedEx performance. “Challenging quarter, solid results,” said Jeff Kaufman of Merrill Lynch.
