FedEx Slumps to Lowest Since 2008 After Cutting Forecast Amid Lower Demand

FedEx Corp. (FDX), operator of the world’s biggest cargo airline, dropped the most in 2 1/2 years after cutting its full-year profit forecast amid declining demand in the U.S. and Asia.

Per-share earnings for the year will be $6.25 to $6.75, 10 cents lower than the previous range, the Memphis, Tennessee- based company said today in a statement. Analysts had projected $6.35, the average of estimates in a Bloomberg survey.

FedEx, an economic bellwether that delivers goods ranging from mobile devices to financial documents, saw U.S. shipments fall for the second quarter in a row as the economy grew at a lower rate than it estimated. Demand dropped for Asian technology products, especially from China, hurting the express international division.

“From talking to our customers, -- the retailers, the manufacturers and so forth -- the primary driver of the reduced demand is the lower sales of electronic products,” Chief Executive Officer Fred Smith said on a conference call. “We expect sluggish economic growth will continue.”

FedEx fell $5.92, or 8.2 percent, to $66.58 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest decline since March 6, 2009. Rival United Parcel Service Inc. (UPS) slipped 3.4 percent to $62.17. FedEx has declined 28 percent this year, while UPS has dropped 14 percent.

No Double-Dip

FedEx’s comments were another sign that retailers and manufacturers may be anticipating a slower holiday season this year, after carriers such as United Continental Holdings Inc. and Delta Air Lines Inc. (DAL) reported sagging cargo shipments.

Retailers are keeping inventory levels low and FedEx isn’t expecting its peak season to show as much volume as 2010.

“While there’s been considerable speculation that the economy has or will soon enter a recession, this is not our view at present,” Smith said on the call.

His comments echoed those of UPS Chief Financial Officer Kurt Kuehn, who said last week that the company expects “subpar growth” in the world’s largest economy.

U.S. shipments declined 3 percent at FedEx last quarter, as the global economy “grew at a slower rate than we anticipated,” Chief Financial Officer Alan Graf said. Volumes for packages sent between countries fell 4 percent, FedEx said.

Sales climbed 11 percent to $10.5 billion as yields gained and domestic shipments in countries outside the U.S. climbed 38 percent.

Fuel Costs

Net income for the fiscal first quarter ended Aug. 31 rose 22 percent to $464 million, or $1.46 a share, compared with a mean estimate of $1.45 a share from 23 analysts surveyed by Bloomberg. Profit was $380 million, or $1.20, a year earlier.

The company also has been spending more on jet fuel, whose cost advanced 40 percent in the period. FedEx typically has a two-month delay in recovering fuel costs through surcharges.

The company said per-share earnings for the quarter ending Nov. 30 will be $1.40 to $1.60, compared with 89 cents a year earlier. Analysts had projected $1.56, the average of 23 estimates in a Bloomberg survey.

To contact the reporter on this story: Natalie Doss in New York at ndoss@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.