FedEx Corp. rose to the highest since 2008 in New York trading as investors focused on strength in shipping demand rather than a reduced earnings forecast the company attributed to winter storms and rising fuel prices.
Adjusted third-quarter profit will slide to a range of 70 cents to 90 cents a share, from a projection of 95 cents to $1.15, Memphis, Tennessee-based FedEx said late yesterday, sending the stock sliding in extended trading. Analysts expected $1.02, the average of 20 estimates compiled by Bloomberg.
A big selloff in the shares today would have been an “overreaction,” Jason Seidl, a Dahlman Rose & Co. analyst in New York, told investors in a note. FedEx foreshadowed the earnings fallout when it said in December it was being “hammered” by storms.
“Despite the fact that transportation is often described as an ‘outdoor sport,’ implying that inclement weather should be thought of as a recurring event, this winter has been exceptionally harsh,” wrote Seidl, who rates FedEx as “buy.”
FedEx gained $1.99, or 2.1 percent, to $95.98 at 4:15 p.m. in New York Stock Exchange composite trading. That was the shares’ highest closing price since May 6, 2008.
“Strength in our base business” continues in all segments and regions amid storms that damped revenue and inflated costs, FedEx said yesterday. The drop in profit for the quarter ending Feb. 28 also will affect the company’s full-year forecast, which FedEx said will be updated when it reports earnings on March 17.
“We’ve had more snowstorms in Memphis this winter than we’ve had for the past 10 years combined,” said Art Hatfield, a Morgan Keegan & Co. analyst who is based in the Tennessee city. He also recommends buying FedEx.
Investors shouldn’t be alarmed by the new forecast because it’s “a one-time weather thing,” Hatfield said yesterday in an interview. The lower forecast “isn’t a read on the economy or volume.”
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