Earnings Season
It's Not The Economy That's Hurting FedEx
Carl Gutierrez, 06.16.10, 06:10 PM EDT
The courier's shares slide as internal factors force the company to offer a cautious outlook.
FedEx Corporation06/16/2010 4:00PM ET$78.07-$4.94-5.95%
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United Parcel Service, Inc.06/16/2010 4:00PM ET$62.41-$0.25-0.40%
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BATS Real-Time Market Data by XigniteFedEx says the economy is continuing to recover at a moderate rate. The bad news for the courier company is that internal issues are going to be a drag on profits, leading the courier's shares to slide after the release of its quarterly results.
During the company's conference call, FedEx chief executive Frederick Smith said he also anticipates a very good year in 2011, forecasting solid growth in FedEx's European business.
Wednesday FedEx ( FDX - news - people ) reported its fiscal 2010 fourth-quarter sales rose 20.1% to $9.4 billion, from $7.9 billion, beating Wall Street's expected top line of $9 billion. Earnings meanwhile reached $419 million, or $1.33 per share, from last year's loss of $876 million, or $2.82 per share. Analysts, on average, had anticipated profits of $1.32 per share.
"FedEx delivered strong results in our fourth quarter, thanks to sequential growth in package volume and our ability to leverage our unique global networks to take advantage of a recovering economy," says Smith.
FedEx, like Caterpillar ( CAT - news - people ), Boeing ( BA - news - people ) and General Electric ( GE - news - people ), is among the companies that are closely watched by the market as balance sheets that offer insight into state of the broader economy.
The company credited the earnings bump to stronger shipment growth in international express and continued growth at FedEx Ground. Still, things weren't perfect. An operating loss at FedEx Freight, the reinstatement of certain employee compensation programs and higher aircraft maintenance expenses impacted the quarter's results.
Many of those same issues will continue to affect the company going forward. FedEx expects earnings during the first quarter to range between 85 cents per share and $1.05 per share, and $4.40 per share and $5.00 per share during its fiscal 2011. The range was a little weak by Wall Street's standards, which anticipates first-quarter profits of $1.03 per share, and $5.05 per share for the full year.
Consequently investors were less than pleased, as shares of FedEx fell 6%, or $4.94, to close at $78.07. Since the beginning of the year, shares of FedEx have slipped 6.5%. Meanwhile on Wednesday, rival United Parcel Service ( UPS - news - people )slipped 0.4%.
While its outlook came up shy of expectations, FedEx's cautious view is not necessarily a strike against the economy. FedEx anticipates the economy will continue its moderate recovery, and its chief financial officer, Alan Graf says that resumed growth in industrial production and global trade is increasing demand for FedEx's transportation services. |
