FedEx Corp.'s second-quarter earnings fell 6% because of a weaker U.S. economy and higher fuel prices, the shipping-services giant said Thursday.
The Memphis, Tenn.-based company considered an economic bellwether, also gave a third-quarter earnings forecast below the Wall Street consensus. For the quarter, Fedex anticipates earnings in the range of $1.15 to $1.30 a share, while analysts, on average, are looking for earnings of $1.37 a share, as provided by a poll from Thomson Financial.
For the three months ended Nov. 30, FedEx said it earned $479 million, or $1.54 a share, down from $511 million, or $1.64 a share, in the year-ago second quarter. Analysts' average projection as derived by Thomson Financial stood at $1.50 a share.
"As we noted last month, higher fuel prices and continued weak growth in the U.S. economy have hindered profitability," said Chief Financial Officer Alan Graf in a statement. "While we have indexed fuel surcharges in place, they cannot keep pace in the short term with rapidly rising fuel prices."
"We continue to benefit from solid international growth, which helps mitigate softness in U.S. industrial production," said Chief Executive Frederick Smith. "While we see challenging near-term economic trends, we remain confident about long-term prospects in all our business segments."
Notice two key points:
1.) Weak US growth. If the US economy were humming along, we'd be shipping more stuff to each other.
2.) Higher fuel prices. These are really starting to hit companies -- see the post two posts below for the negative impact of fuel costs on the rail industry.
3.) There was no mention of a Christmas bump. I've heard a ton of stuff about yesterday being the biggest shipping day of the year. But that is not translating into better earnings for Fed Ex. And considering the negative nature of this news, you'd think the CEO would be thrilled to report something positive
