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FedEx: Cost plan can counter sluggish growth

FedEx's forecast for the current quarter, which incorporates the critical holiday season, falls short of Wall Street expectations.

By SAMANTHA BOMKAMP
The Associated Press

12/19/2012

NEW YORK — FedEx is more pessimistic about the U.S. economy than it was three months ago, but more assured of its own ability to grow earnings.

The world's second-largest package delivery company lowered its economic forecast for the U.S., saying that there remains a lot of uncertainty for the company and the country.

Its forecast for the current quarter, which incorporates the critical holiday season, falls short of Wall Street expectations.

But FedEx maintained its forecast for the full fiscal year ending in May, counting on a massive cost reduction plan and a slightly more optimistic view of growth overseas. Shares rose 2.6 percent in afternoon trading.

FedEx Corp. posted earnings of $438 million, or $1.39 per share for the quarter that ending in November, compared with $497 million, or $1.57 per share, a year ago. That was below the $1.41 per share that Wall Street was expecting, according to a poll of analysts by FactSet.

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Revenue rose to $11.1 billion from $10.6 billion previously, as the company scaled back its operation to better match demand and some of its raised rates. Analysts forecast revenue of $10.84 billion.

Growth in the company's freight and ground operations boosted results, but FedEx reported "persistent weakness" in its core express network. Operating income in that segment fell 33 percent. FedEx and its larger rival UPS Inc. have both seen consumers and businesses opt for slower shipping options to cut costs.

FedEx said on Wednesday that it expects earnings will be between $1.25 and $1.45 per share in the third quarter. Analysts that follow the company were predicting per-share earnings of $1.45.

The company, based in Memphis, Tenn., also said it expects to earn between $6.20 and $6.60 per share for the year ending in May, excluding any charges from the company's buyout plan. Wall Street is looking for $6.34.

Earlier this month FedEx said it will offer some employees up to two years pay to leave, starting next year. The voluntary program is part of an effort to cut annual costs by $1.7 billion within three years. The plan also includes cutting aircraft and underused assets.

The Trucker staff can be reached to comment on this article at editor@thetrucker.com.

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