FedEx cuts full-year forecast after disappointing Q3

By Freddie Pierce
FedEx Corporation has cut its full-year forecast following a worse-than-expected third quarter profit. The company, which is the second largest parcel...

FedEx Corporation has cut its full-year forecast following a worse-than-expected third quarter profit.

The company, which is the second largest parcel delivery company in the US, reported earnings of $1.23 per share for the quarter ended February 28th, factoring out the years realignment costs.

The company, which has cut its full-year earnings forecast twice in the last six months, has attributed the fall in profits to a shift from express air services to cheaper and slower transit services.

FedEx has pledged to decrease its Asian capacity and realign its transit networks to reduce costs. .

“The third quarter was very challenging due to continued weakness in international air freight markets, pressure on yields due to industry overcapacity and customers selecting less expensive and slower-transit services,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer.

“In response, beginning April 1, FedEx Express will decrease capacity to and from Asia and will aggressively manage traffic flows to place low yielding traffic in lower-cost networks. We are currently assessing how these actions may allow FedEx Express to retire more of its older, less-efficient aircraft. We remain focused on our strategic cost reduction programs, which are ramping up and on track,” he continued.

Outlook

FedEx projects earnings to be an adjusted $1.90 to $2.10 per diluted share in the fourth quarter and an adjusted $6.00 to $6.20 per diluted share for fiscal 2013 before charges related to the company’s business realignment.

In last year’s fourth quarter, the company reported earnings of $1.99 per diluted share, excluding a $0.26 per diluted share non-cash aircraft impairment charge at FedEx Express. Including this charge, earnings were $1.73 per diluted share.

“Our lower-than-expected results for the quarter and reduced full-year earnings outlook were driven by third quarter international revenues declining approximately $100 million versus our guidance primarily due to accelerating customer preference for lower-yielding international services, lower rate per pound and weight per shipment,” said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer.

“We expect these international revenue trends to continue. We have other actions under way beyond those already included in our profit improvement program. Some of these additional actions may involve temporarily or permanently grounding aircraft, which could result in asset impairment or other charges in future periods.”

Share

Featured Articles

Weekly news round-up across supply, logistics & procurement

CIPS chief in supply cash-flow warning; Women do better in large firms - Gartner; Accenture Euro chief's Ukraine advice; Dell supply head's green goals

UST webinar on managing supply risk available on-demand

Global CPO David Loseby and UST's Jonathan Colehower share insight on using technology, both to mitigate supply chain risk and to gain supply visibility

Global land, sea and air logistics news round-up

Global logistics IoT spend ‘will top $32bn by 2032’; UN $10mn grant for explosion-hit Port of Beirut; Costa Rica ransomware attack causes ports chaos

Comfort zones the enemy of sustainability - CIPS economist

Sustainability

Women in supply fare better in large firms - Gartner report

Digital Supply Chain

What can be done to avert food catastrophe foreseen by UN?

Logistics