Shares dive as Fedex misses forecasts
Shares in Federal Express fell almost 11 per cent in early New York trading yesterday, after the world’s largest express package company said first-quarter earnings would miss Wall Street forecasts, even though fourth-quarter earnings more than doubled.
The company predicted earnings for the three months to August 31 of between 40 cents and 50 cents a share, compared with the consensus of Wall Street estimates of 57 cents.
Gregory Burns, an analyst at JP Morgan, said many momentum investors had expected more and were dumping the stock. “We think 50 cents should be a floor, not a ceiling,” he said.
FedEx, which reported earnings of 41 cents a share in last year’s first quarter, said there was “confusion” in the market. It added that it expected to earn Dollars 2.77 a share for the full 2003 fiscal year, up from the Dollars 2.39 reported for 2002.
Fourth-quarter earnings were boosted by sharp growth in FedEx’s ground services, where revenues expanded 21 per cent over the year as customers of rival UPS shifted their business in preparation for a possible strike at that company. Operating income more than doubled to Dollars 128m (Euros 128m), from Dollars 57m, as revenues jumped 27 per cent to Dollars 743m.
Revenues for FedEx Express, which accounts for three-quarters of total revenues, grew 4 per cent in the quarter to Dollars 4bn from Dollars 3.85bn, as international growth helped to offset declines in domestic volume and yield. Full-year revenues declined 1 per cent to Dollars 15.32bn.
Overall, fourth-quarter earnings per share rose to 78 cents on net income of Dollars 236m, up from 38 cents on net income of Dollars 113m, after charges, last year. Revenues rose 6 per cent to Dollars 5.42bn from Dollars 5.12bn.
Frederick Smith, FedEx chairman and chief executive, said the company saw a modest economic recovery under way.
For the 2002 fiscal year, revenues rose 5 per cent from Dollars 19.6bn and free cash flow jumped to Dollars 616m, compared with a negative figure of Dollars 69m. Operating margins rose from 5.5 per cent in 2001 to 6.4 per cent.
The improvement in cash flow allowed FedEx to pay its first dividend, cut debt by Dollars 315m and buy back 3.35m shares. Cash flow was bolstered by a reduction in capital spending to Dollars 1.6bn – the lowest in eight years – as aircraft deliveries were deferred or cancelled.
In early afternoon in New York, FedEx shares were down Dollars 6.12 to Dollars 49.90. Lex, Page 14
Copyright © 2002: Financial Times Group
