FedEx (FDX) Off After Hours on Revised Forecast
Shares of package delivery and logistics company, FedEx Corporation (FDX: Charts, News) fell -$2.49 or -2.84 percent to $85.05 per share in afterhours trading on Tuesday, after the company cut its outlook for fiscal first quarter earnings. FedEx cited weaker global economic conditions and a slowdown in manufacturing for revising its guidance for its first quarter that ended August 31st.
The company now expects to earn $1.37 to $1.43 per share versus a previous forecast of $1.45 to $1.60 per share. Analysts were expecting earnings of $1.56 per share. Daily Chart
Memphis, Tennessee based FedEx Corporation is the second largest package delivery and logistics services company in the world after United Parcel Service (UPS
). Due to the diversity in the industries the company services, FedEx is considered an economic bellwether. Lower earnings for FedEx could indicate further global economic weakness reflecting conditions in Europe and softening in China. FedEx's Express division saw the biggest downturn as more people chose to opt out of overnight air deliveries for less expensive alternatives. In June, the company reported lower fourth quarter earnings due in part to charges made in retiring aircraft and a slowdown in cargo volume growth. Recent manufacturing data from China and the Eurozone confirm the global trend with FedEx joining competitor United Parcel Service in cutting its capacity in Asia. UPS earnings, reported in July were also lower than expected with the company cutting its full year profit guidance. Despite the revised estimates, FedEx earnings for last year's first quarter came to $1.49 per share with annual revenue of $43 billion. On August 17th, the Board of Directors declared it was paying out a quarterly cash dividend of $0.14 per share to shareholders of record September 10th, 2012 payable on October 1st. FedEx is currently undergoing an extensive restructuring, with the company offering employees of its Express division voluntary buyouts. The employee reduction program is a key part of the restructuring plan, with over 100,000 employees in that division alone. In addition, the company is replenishing its fleet of airplanes and vehicles to save on spiraling fuel costs, which have severely affected operating margins. Thanks to the boom in natural gas derived from shale, the company is switching its fleet of vans from gasoline to natural gas, which given the disparity in prices between gasoline and natural gas, will save the company considerable expense. While FedEx Corp. has been growing consistently and beaten earnings estimates in the last four quarters, the current global economic situation does not appear to be improving to the point where the company can sustain the growth it has shown previously. With rising fuel costs and a slowdown in business, stocks in the transportation industry as a whole will most likely continue to weaken. FedEx will be releasing its first quarter earnings on September 16th, which will be indicative of future trends in the package delivery and logistics services business and an indication for both the domestic and global economies. Other News About FDX FedEx: What's Up Internationally?
Article on FedEx's international business. FedEx Projects First Earnings Drop Since 2009 as Economy Slows
Bloomberg article on the lower forecast for earnings. Other Stocks in the News Morgan Stanley, Santander Post Gains
Banks get boost from JP Morgan Cazenove analysts. Apple Announces Sept. 12 Event as New iPhone Anticipated
Apple will unveil new iPhone at September 12th
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Published on Sep 5, 2012
By Jay Hawk