FedEx Sees Profit in Line With Estimates on Moderate Economy

  • Shipping company’s outlook excludes just-acquired TNT Express
  • Pension accounting change helped drag firm to quarterly loss

FedEx Corp. forecast an annual profit in line with analysts’ projections, excluding any effect from its recently completed purchase of Dutch shipper TNT Express for $4.8 billion.

Earnings for the fiscal year ending next May will be $11.75 to $12.25 a share, the operator of the world’s largest cargo airline said in a statement Tuesday. The company said it was unable to provide guidance that included TNT results and a change in pension accounting. Analyst forecast $11.96, the average of nine estimates compiled by Bloomberg.

“I was a little disappointed to see their guidance does not incorporate TNT,” Logan Purk, an analyst at Edward Jones, said by telephone. “The implication is their guidance would come down for the year if it included TNT.”

FedEx declined 1.2 percent to $162 at 6:40 p.m. in New York. The company said its outlook assumed “moderate” economic growth.

TNT Acquisition

The TNT acquisition, which closed May 25, gives FedEx an extensive ground delivery network in Europe. That makes it a stronger competitor to market leaders United Parcel Service Inc. and Deutsche Post AG’s DHL.

FedEx expects capital spending related to the integration of TNT at $100 million this fiscal year, with total integration costs of $200 million in the same period, Chief Financial Officer Alan Graf said on a conference call with investors and analysts. While the purchase will boost earnings in fiscal 2018, Graf declined to say whether it would dilute profits this year.

“The two plus two equals seven equation of us buying TNT is extraordinary,” FedEx Chief Executive Officer Fred Smith said on the call.

TNT and FedEx Express, the company’s cargo airline, will report financial results as separate segments during 2017, Graf said.

FedEx also reported adjusted fiscal fourth-quarter earnings of $3.30, topping the average estimate of $3.28. Including TNT costs and pension accounting changes, FedEx had a net loss of $70 million, or 26 cents a share, for the quarter. Revenue of $12.98 billion exceeded analysts’ expectations.

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