William B. Cassidy, Senior Editor | Sep 05, 2012 10:40AM EDT
Fedex lowered its earnings outlook for the quarter ending Aug. 31, claiming weakness in the global economy is hampering FedEx Express earnings growth.
The $43 billion global transportation company on Tuesday lowered its earnings forecast for its fiscal first quarter to $1.37 to $1.43 per diluted share.
That compares with an earlier FedEx forecast in the $1.45 to $1.60 range. The company said it has not yet closed its books for the June-to-August quarter.
The lower forecast reflects a global economy that weakened over the summer, especially in Europe and Asia, depressing demand for air freight.
Stifel Nicolaus analyst David G. Ross attributed the “miss” to international express weakness” but told investors “it all ties into the same global network.”
FedEx has seen sluggish growth in traditional air freight transport, while the priority air service and ocean shipping markets fared much better.
Shippers’ shift toward ocean freight services pulled down FedEx Express’s fourth quarter operating margins from 6.5 percent to 4.1 percent year-over-year.
“We were not surprised by softening Express trends, given recently decelerating international air freight trends,” Jefferies & Co. analyst Peter Nesvold said.
Rising jet fuel prices in July and August also squeezed FedEx Express margins, as prices rose faster than the carrier’s fuel surcharges, Ross told investors.
Lower earnings should spur FedEx Express to restructure, Ross said. “We believe a smaller domestic express network is necessary to preserve/expand margins.”
Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter at @wbcassidy_joc.
