FedEx sees ‘modest’ economic gains; 3Q profit up
FedEx is indicating the global economic recovery is gaining steam.
The world’s second-largest package delivery company said Thursday its fiscal third-quarter profit more than doubled from a year earlier. FedEx also raised the forecast for full-year earnings — bringing it in line with Wall Street’s projections — on expectations of “a continued modest recovery in the global economy.”
The company, considered an economic bellwether because of the variety of products it ships, said Thursday it earned $239 million, or 76 cents per share, compared with $97 million, or 31 cents per share a year earlier.
Revenue rose 7 percent to $8.70 billion. The results exceeded Wall Street expectations for earnings of 72 cents per share and revenue of $8.37 billion. Shares were down about 2 percent in pre-market trading, but they had risen 4 percent this week ahead of the report.
The company, based in Memphis, Tenn., said results were boosted by higher shipping volume, particularly at its international express and Ground units.
Average daily volume in International Priority packages — those shipped express outside the U.S. — grew 18 percent, led by exports from Asia.
Average daily package volume at FedEx Ground grew 5 percent, mostly due to businesses shipping more packages to other businesses. Better volume is a good sign for FedEx — and in turn, the economy — because it means consumers and businesses are shipping more goods.
FedEx made more money per package mostly due to higher package weight — another positive economic sign.
Cost cuts also boosted results.
But the results also show that large transportation companies like FedEx continue to battle higher fuel costs. In addition, a loss at the company’s freight unit and partial reinstatement of some employee benefits the company had taken away during the recession damped results.
For the fourth-quarter, FedEx expects earnings per share of $1.17 to $1.37, compared with analysts’ prediction of $1.26 per share. FedEx said reinstatement of more employee compensation programs will hurt earnings in that period as well as in the next fiscal year, which begins in June.
UPS, the world’s largest shipping company, said last month its fourth-quarter earnings nearly tripled from a year earlier. Still, UPS said its freight business — which transports larger products like appliances and cars — continued to lose money.
FedEx shares lost ground in premarket trading after it released results. But shares climbed more than $3 in the week before the earnings report.