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FedEx downgrades profit forecast

By control on September 19, 2012

FedEx Corp. saw earnings per diluted share slide from $1.46 to $1.45, year-over-year, in the first quarter of fiscal-year 2013, which ended August 30. In a press release, FedEx attributed the decline to global economic woes and downgraded its forecast for the full financial year as a result.

Alan Graf, Jr., FedEx’s executive vice president and chief financial officer, spoke out about the troubles that plagued the integrator during the first quarter of fiscal-year 2013. One particular area of struggle, Graf explained, was the FedEx Express sector, which recorded a 28 percent, year-over-year, decline in operating income during the three-month period.

“Earnings for the first quarter were below our expectations as weak global economic conditions dampened revenue growth, drove a shift by our customers to our deferred services and outpaced our near-term ability to reduce FedEx Express operating costs to match demand levels,” he said in a statement.

Even so, FedEx Express’ revenue rose 1 percent, year-over-year, to $6.63 billion in the first quarter, while the sector’s average daily international export volume similarly swelled 1 percent, year-over-year. In the press release, FedEx credited the latter increase with improvements in Europe and Asia. Unfortunately, the global integrator recorded a 5 percent, year-over-year, drop in daily package volumes in its domestic U.S. market.

Such declines made a huge dent in the sector’s profitability, FedEx Corp. CEO Frederick Smith explained. “Weakness in the global economy constrained revenue growth at FedEx Express during our first quarter and affected our earnings,” he said in a statement. “We are taking further actions to reduce costs and adjust our networks to match current and anticipated shipment volumes.”

Still, he said, the FedEx Ground and FedEx Freight segments performed particularly well during the first quarter of fiscal-year 2013. The integrator’s Ground segment saw revenue and operating income rise 8 percent and 9 percent, year-over-year, respectively, during the first quarter, while the freight segment netted 5 percent, year-over-year, revenue growth during the three-month period.

Overall, FedEx’s revenue rose 3 percent, year-over-year, to $10.8 billion in the first quarter of fiscal-year 2013 while operating income surged 1 percent, year-over-year. The integrator’s net income stalled during the first quarter, however, falling 1 percent, year-over-year, to $459 million.

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