Shares of FedEx Corp. (FDX), widely regarded as a barometer of global economic health, took some lumps earlier this month when the company said that its upcoming earnings report was likely to come up shy of previous expectations. Shares managed to recover over the next two weeks as the release approached. Today, that report hit the wires with the company actually topping expectations of profits, but in the same breath lowered its outlook for the rest of the fiscal year through May 2013.
The Memphis, Tennessee-based package delivery expert reported that for the three months ended August 31 net income totaled $459 million, or $1.45 per share; down from $464 million, or $1.46 per share in the year prior quarter. It was the first quarterly earnings dropped in nearly three years for FedEx, but the net income figures did outpace analyst expectations of $1.40 a share.
However, FedEx placed forecasts for its second quarter, ending November 30, at $1.30 to $1.45 per share, well below last year’s quarterly total of $1.57 per share and analysts’ predictions of $1.67 per share.
For the full year, the company had originally expected earnings between $6.90 and $7.40 per share. This morning, those expectations were dropped to between $6.20 and $6.60 per share, citing continuing lower demand for premium shipping services, high fuel costs and global economic concerns.
“Weakness in the global economy constrained revenue growth at FedEx Express during our first quarter and affected our earnings,” said FedEx chief executive Fred Smith in a corporate statement. The CEO also stated that the company is taking action to reduce expenses and tweak its networks to match anticipated shipment volumes. Depending on the degree and conciseness of the cost reduction efforts related to lower demand, there could be a meaningful upside impact to future earnings. Of course, only time will tell how that pans out.
Shares of FedEx are trading down about 2 percent at $87.40; up from lows of $86.03 in pre-market activity.
By Andrew Klips
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