Brooke Sutherland is a Bloomberg Gadfly columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.

Well, it could have been worse.

Preparing for Pain
Analysts expected a cut to FedEx's 2018 guidance after the company warned in July the TNT cyber attack could harm earnings. But they weren't pessimistic enough.
Source: Bloomberg

FedEx Corp. reported quarterly results on Tuesday and shareholders were prepared for carnage after the company's TNT Express unit was hit by a cyberattack so severe it forced facilities to process transactions by hand. And there was a big hit to earnings: FedEx's adjusted EPS for the first period of its fiscal 2018 was $2.51, below the average call of $3 from analysts. As such, the company had to reduce its full-year guidance (which it had only just rolled out about a week before the cyberattack in June). It now expects to earn $12 to $12.80 in adjusted EPS this year, with even the high end falling short of analysts' heavily reduced estimates.

But amid all the bad news, there was a silver lining. FedEx reaffirmed its commitment to improve operating income in its Express division (including the TNT business it acquired in 2016) by $1.2 billion to $1.5 billion by 2020. Some analysts had feared that target may be pushed out as the company was forced to grapple with the effects of the cyberattack on top of what was already likely to be a tricky integration.

Goal Intact
FedEx remains on track for its expected profit gains in the Express unit that includes the TNT Express business
Source: Bloomberg
NOTE: Data for FY 2020 shows the midpoint of FedEx's goal for $1.2 billion to $1.5 billion in operating income improvement.

Likewise, FedEx maintained its goal for $5.9 billion of capital spending. There had been a concern that FedEx would have to spend heavily to better equip its system against future attacks.

The fact that it's not ramping up its spending plans could raise a few eyebrows; frankly, all companies should be taking a harder look at their preparedness, especially in light of the Equifax Inc. breach. But it's worth noting that TNT's IT systems had been singled out for an upgrade as part of the deal integration process so perhaps some of that has already been accounted for.

Point being, this TNT cyberattack isn't throwing FedEx too far off track from its longer-term improvement goals.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Brooke Sutherland in New York at

To contact the editor responsible for this story:
Beth Williams at