Tennessee – Package delivery company FedEx Corp (NYSE:FDX) posted on Wednesday its quarterly profits and they turned to be significantly lower than what Wall Street forecasted, partly due to weak conditions in the global economy and a strong U.S. dollar.
Analysts had previously predicted earnings per share at $10.82, with FedEx estimations between $10.60 and $11.10. But on Wednesday, the company said now it expects earnings per share for the fiscal year ending May 31 next year to be in the range from $10.40 to $10.90. From this announcements, FedEx stocks went down more than 2 percent.
“We remain focused on executing our profit improvement program, leveraging e-commerce growth and enhancing our revenue quality,” Chief Financial Officer Alan Graf said in a statement.
It also lowered its full-year earnings forecast, citing modest economic growth and higher-than-expected operating costs plus self-insurance reserves at its ground domestic U.S. package unit. Demand has also been affected as operators now fill trucks with smaller orders from multiple customers as opposed to regular trucking firms that move full loads for single customers.
Despite the discouraging data, FedEx reported a net profit for its fiscal 2016 first quarter ending Aug. 31 of $692 million or $2.42 per share, up 6 percent from $653 million or $2.26 per share a year earlier.
“When we see a 60 basis point drop in our industrial production forecast, it’s not surprising we’d see an impact on volume not only at FedEx but on the industry as a whole” said Graf.
Confidence in U.S. economy
The company said its U.S. domestic package business revenue rose a 29 percent, standing at $12.3 billion versus $11.7 billion a year earlier, but unit revenues were down 4 percent in its international activities in part due to a stronger U.S. dollar and a lower gas prices.
Meanwhile, FedEx is maintaining unchanged its forecasted capital expenditures for fiscal year 2016, at $4.6 billion as they keep their hopes on the U.S economy to grow 2.5 percent this year and 2.8 percent in 2016, fueled by consumer spending.
Executives said they expect FedEx revenues to peak during the holiday season and are planning to hire around 55,000 seasonal workers.
Source: Reuters