FedEx Beats Profit Estimates by Reducing Costs

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Sept. 18 (Bloomberg) -- Bloomberg Industries' Lee Klaskow and Steve Miller, non-executive chairman at AIG, examine first-quarter results from FedEx as the company beat profit estimates on cost cuts. They speak on Bloomberg Television's "Bloomberg Surveillance."

I thought there was skepticism about a weak american economy, but this was to be a very attractive report.

Yeah, it seems they're in the miths of a turnaround.

They're trying to restructure their express business.

They've modernized their fleet, retiring older planes.

There are voluntary buyouts, so that's all adding to the bottom line.

The critical thing is pricing.

They're going to raise rates.

Do they have legitimate pricing power?

Is there such a distinction in their service that they can raise rates?

Well, some of their premium services, absolutely.

They'll have generate increases or g.r. 's every year, with larger customers, so they tend to discount those heavily.

The g.r.i., they tend to be paid for, the retail person.

If did you into the store, you want to send a t-shirt to grandma.

We talked about pricing power, but does fedex have pricing power with apple or u.p.s. have pricing power with amazon?

These are big customers they really rely on.

The express or the air fright business is an attractive business for them obviously new phones like iphone are coming on to the market, good for them.

A company like apple is going to be getting a discount, obviously, from what the average retail person would pay.

Steve miller with us, the king of turnarounds, no question with a.i.g., helping.

This shows a vibrancy that's out there, and it's almost a 196 on's conversation.

I feel like i'm jack welch talking about pricing power and raising rates.

Do you see that at a.i.g. when you walk into a negotiation on a big institutional contract or a mom and pop kind of operation?

Does a.i.g. have pricing power?

I would say no, we do not have pricing power, except to the extent we can prove we can give better service than our competitors.

But the main thing that will distinguish us is we select the right risks and price them right with our premiums.

And if that means we lose some business elsewhere, so be it.

But we want to be where we can make a risk adjusted return.

Steve, does a.i.g. have pricing power when it comes to attracting talent?

Well, four years ago we had no ability to attract teanlt, although we did get a few good people.

Now everybody wants to work at a.i.g. because they have seen the tremendous success and turnaround.

I look at the cash in fedex, really not there, when everything is said and done.

It's not like microsoft or apple.

What are they spending all their cash flow on?

Is it an endless purchase of airplanes?

Aurp they're refreshing their fleet.

They spent a lot of significant money on it recently.

What they're doing is really -- they're buying 767, boeing 767's, and those are 30% more fuel efficient.

And that costs a lot of money.

Planes aren't cheap.

Thank you so much.

A lot to talk about here.

I think it's just fascinating, the rate boost idea.

Absolutely.

I wrned if fedex is vulnerable to activist investors as well, because they didn't raise their forecast, they are still beholden to nominal g.d.p., and they've been trying to turn

This text has been automatically generated. It may not be 100% accurate.

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