Subscribe to our free, weekly email newsletter!


FedEx lowers fiscal third quarter earnings guidance

By Jeff Berman, Group News Editor
February 15, 2011

Citing severe winter storms and higher-than-expected fuel prices FedEx said this week that it’s projected fiscal third quarter earnings have been impacted by roughly $0.25 per share.

FedEx officials said this downgrade results in third quarter earnings—not including FedEx Freight combination costs—expected to come in at $0.70-to-$0.90 per diluted share compared to previous guidance of $0.95-to-$1.15 per diluted share. They added that this guidance assumes no further weather impact and stable fuel prices for the rest of the quarter and that it will impact earnings guidance for the full year.

Third quarter earnings will be announced on March 17.

“We experienced significant network disruptions in the U.S. and Europe and unusually high costs from severe winter storms.  In addition, fuel prices continued to escalate since we provided our earnings outlook in December,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer, in a statement. “We continue to see strength in our base business across all transportation segments and geographies.  I would like to take this opportunity to thank all our team members for their hard work and dedication during the recent severe weather events.” 

This news follows FedEx’ fiscal second quarter release in December in which net income dropped 18 percent to $283 million. Quarterly revenue of $9.63 billion was up 12 percent from $8.6 billion a year ago, and operating income at $469 million was down 18 percent from $571 million. FedEx reported earnings per share of $0.89, which fell short of last year’s $1.10 and of Wall Street estimates of $1.31 per share.

Company officials said that net income was down, due to costs pertaining to the company’s September announcement regarding the meshing of its FedEx Freight and FedEx National LTL operations, a reserve associated with a legal matter at FedEx Express, the reinstatement of certain employee compensation programs, and higher pension and higher aircraft maintenance expenses.

“Strong demand for FedEx transportation, outstanding customer service…and a healthier global economy combined to drive revenue higher,” said FedEx Chairman, President, and CEO Frederick W. Smith on a conference call. “We are relentlessly focused on improving our yield; our strategy is fast gaining traction. Yields and volumes increased significantly year-over-year in our transportation segments during the second quarter.”

Despite FedEx lowering its quarterly guidance, the feedback from Wall Street analysts suggested that things will recover for the company fairly quickly.

Chris Ceraso, an analyst at Credit Suisse First Boston, wrote in a research note that weather conditions will get better and fuel prices will stabilize, allowing the company’s fuel surcharge mechanism to catch up to spot prices.

And Robert W. Baird analyst John Langenfeld explained that FedEx continues to see strength across all of its businesses, with a solid outlook across all geographies it is active in.

“Improving demand results in recent quarters reflect an improving global freight environment with demand across the business segments improving,” wrote Langenfeld. “Importantly, pricing discipline is evident across all divisions, providing the potential for much stronger peak earnings. Expense pressure remains a headwind through F11 as costs reenter the business to support growth (i.e., benefits, plane maintenance, incentive compensation), but we expect to see significantly improved F12 operating leverage as costs normalize.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

While the ongoing labor negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) ostensibly going from bad to worse, following the ILWU’s announcement late last week that it was halting negotiations from November 20 through November 30, a Congressional group last week penned a letter to PMA and ILWU leadership expressing concern over the state of the negotiations.

The ongoing themes of tight capacity and carrier pricing power are still in full effect, much to the dismay of shippers, based on the most recent edition of the Shippers Condition Index (SCI) from freight transportation forecasting firm FTR.

Information abounds about the growing trend of electric lift trucks and the advantages and disadvantages of the electric solution. Amid all of the information from so many sources, what's the truth about electric lift trucks? This complimentary white paper breaks through the clutter to review why electric lift trucks are gaining in popularity and also to review their challenges, as well as their economic and environmental benefits.

Three weeks after initiating a coordinated series of slowdowns that have mired the major West Coast ports of Tacoma, Seattle, Oakland, Los Angeles and Long Beach, the ILWU has pushed away from the bargaining table.

DHL has released the third edition of its Global Connectedness Index (GCI), a detailed analysis of the state of globalization around the world.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA