Oil prices, economy send FedEx earnings down 6%; offers grim outlook

By WOODY BAIRD
The Associated Press

3/20/2008

MEMPHIS, Tennessee — FedEx Corp. reported a 6 percent drop in third-quarter earnings Thursday due to high oil prices and a slow U.S. economy, and indicated it would miss Wall Street forecasts for the fourth quarter.

The shipping company said its fourth quarter earnings would fall from a year ago and said it expects only limited earnings growth for its next fiscal year.

FedEx said it earned $393 million, or $1.26 a share, in the three months ended Feb. 29 versus $420 million, or $1.35 a share, for the same period last year. Revenue rose 10 percent to $9.44 billion, from $8.59 billion.

Analysts with Thomson Financial expected earnings of $1.22 a share on revenues of $9.11 billion.

“FedEx faces a challenging economic environment that includes persistently high oil prices, sluggish U.S. growth and continued concerns in the credit markets,” Frederick W. Smith, company chairman and chief executive officer, said in a statement. “We are managing our costs while positioning our portfolio of global transportation solutions to increase our profitability and returns once conditions improve.”

Average daily package volume for FedEx Express, the company’s cargo airline, and FedEx Ground, it’s trucking division, grew 5 percent, the earnings report said.

FedEx predicted earnings in the fourth quarter of $1.60 to $1.80 a share, compared to $1.96 for last year’s final period. Analysts were looking for earnings of $1.95 a share in the fourth quarter.

That outlook “assumes no additional increases to current fuel prices and no further weakening in the economy,” the report said.

“Looking ahead to our fiscal 2009, we are expecting a continuation of fourth quarter trends, which would result in limited earnings growth next year,” said chief financial officer Alan B. Graf Jr. “We are scrutinizing all expenses and investments to realign them with the current environment.”

Analysts were looking for earnings of $6.31 a share for this fiscal year and $7.11 a share for fiscal 2009.