September 24, 2020

Citing Weak Global Growth, FedEx Cuts Its Profit Outlook

Frederick W. Smith, the chief executive, said he did not expect economic conditions to improve much any time soon, although he did not expect the United States to dip back into recession.

“We expect sluggish economic growth will continue, largely due to a lack of confidence that U.S. and European policy makers will effectively address current economic challenges,” Mr. Smith said in a conference call to discuss quarterly results.

With inventories low, FedEx expects to benefit if there is an uptick in demand in the run-up to the holiday shopping season and retailers need fast delivery. Much is also riding on robust online orders. But for now, things remain subdued.

The sheer volume of goods moved by FedEx makes its shipment trends a bellwether for consumer demand and economic growth. The value of packages handled by FedEx’s trucks and planes every year is equivalent to about 4 percent of United States gross domestic product and 1.5 percent of global G.D.P.

The company so far has had little resistance to rate increases, the latest of which went into effect this month.

FedEx reiterated its $4.2 billion capital expenditure plan for the year ending next May. The company is considering buying about 50 wide-body freighters from Boeing and Airbus to update its fleet to more fuel-efficient models.

FedEx said fiscal first-quarter profit, which slightly beat forecasts, rose to $464 million, or $1.46 a share, from $380 million, or $1.20 a share, in the period a year ago. Analysts, on average, had expected a profit of $1.45 a share, according to Thomson Reuters.

The company cut its forecast for earnings for the year to May 2012 to $6.25 to $6.75 a share from its June estimate of $6.35 to $6.85.

Revenue rose 11 percent, to $10.52 billion, from $9.46 billion a year earlier. That was above the average forecast of $10.32 billion.

Shares of FedEx fell $5.92, or 8.2 percent, to $66.58..

With the stock down about 30 percent this year, FedEx said it planned to buy back 5.7 million shares under its existing repurchase authorization.

Article source:

Speak Your Mind