Thursday, September 22, 2011

FedEx Cuts Forecast, Warns of 'Sluggish Growth'

Package and parcel giant's profit rose 22 percent in June-August quarter
FedEx’s net profit rose 22 percent to $464 million in its June-August quarter, but the world’s largest air cargo carrier lowered its earnings expectations for the rest of the year, citing a slowdown in global trade.

"We expect sluggish economic growth will continue," CEO Fred Smith told analysts. FedEx, widely considered an economic bellwether, said it had a “moderate outlook” for the economy and now expects to earn $6.25 to $6.75 per share for its current fiscal year, compared with a previous estimate of $6.35 to $6.85.

The company’s net profit grew on an 11 percent gain in overall revenue to $10.5 billion. But U.S. domestic shipments at FedEx Express fell 3 percent and international express shipments fell 4 percent from the same period a year ago.

"The U.S. and global economy grew at a slower rate than we anticipated during the quarter," said Chief Financial Officer Alan B. Graf. "While FedEx Ground and FedEx Freight achieved improved operating results despite lower than expected growth, the more rapid decline in demand for FedEx Express services, particularly from Asia, outpaced our ability to reduce operating costs."

FedEx’s express unit posted a 19 percent drop in operating income, despite a 12 percent rise in revenue. The decline in volume was partly offset by a 13 percent increase in revenue per package, which included higher pricing and higher fuel charges.

FedEx’s ground transportation unit posted a 42 percent jump in operating income to $407 million. Revenue rose 16 percent to $2.3 billion. Average daily package volume grew 5 percent.

-- Contact Joseph Bonney at Follow him on Twitter @josephbonney

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