FedEx cuts profit outlook again
Citing “deteriorating economic conditions,” FedEx Corp. on Monday warned for the second time in five weeks that its earnings for its fiscal fourth quarter will fall below earlier forecast.
Memphis-based FedEx now sees its fiscal fourth-quarter profit at 50-60 cents per share, well down from the 85 cents per share it earned a year earlier. FedEx also expects its profit in the first quarter of its new fiscal year, which begins June 1, to fall significantly below the 58 cents per share it earned last year.
“Deteriorating economic conditions and the rapid decline in the high-tech and other durable goods industries have increasingly affected FedEx Express volumes,” said Alan B. Graf Jr., the company’s executive vice president and chief financial officer. “In April, U.S. domestic average daily volume at FedEx Express declined 9% year-over-year. Additionally, the growth rate of FedEx International Priority shipments slowed to 1% year-over-year. FedEx Ground package volume grew about 5%, while package yields at both FedEx Express and FedEx Ground continue to show solid growth.”
Estimates had FedEx earning 69 cents a share in the fourth quarter, which ends May 31, and 57 cents per share in the first quarter, according to analysts’ consensus compiled by Thomson Financial/First Call.
FedEx earlier had lowered its profit guidance for the fourth quarter, saying on April 4 that it would not earn the 85 to 90 cents per share that was then expected.
As of early afternoon Monday, FedEx shares were trading at $40.35 a share on the New York Stock Exchange, down 93 cents from Friday’s close.
Ed Wolfe, an analyst with Bear Stearns, said he has reduced his estimate for FedEx’s earnings in the new fiscal year from $2.25 a share to around $1.75-$1.80, but added that he had “little confidence” in his revised estimate. Wolfe said the warning is not a good sign for arch-rival United Parcel Service either. “The implication is that UPS domestic express volumes could be negative” this year, he said.
