DALLAS (AP) — FedEx Corp. says its latest quarterly
profit rose 5 percent from a year ago despite storms that raised the
company’s costs, but the results were below analysts’ expectations.
The
company’s ground-shipping segment is doing better, but the
express-delivery business is flat and customers continue to shift to
slower, cheaper services for international shipments.
The
package-delivery giant said Wednesday that net income in the quarter
that ended Feb. 28 rose to $378 million, or $1.23 per share, from $361
million, or $1.13 per share, a year ago. Analysts surveyed by FactSet
expected $1.45 per share.
Revenue rose 3 percent to $11.30 billion from $11 billion, missing Wall Street’s forecast of $11.43
billion.
The
weak results drove FedEx to lower its forecast of full-year earnings.
However, FedEx expects fiscal fourth-quarter earnings of between $2.25
and $2.50 per share, which leaves room to beat analysts’ prediction of
$2.34 per share.
FedEx said that weather reduced operating income
by $125 million in the December-to-February third quarter. Snow, ice and
freezing temperatures slowed the company’s trucks and planes and raised
costs for everything from de-icing to overtime. Shipments dropped off
during storms because some retail shippers in the East and Midwest
closed.
Rival United Parcel Service Co. struggled to keep up with
peak volumes just before Christmas — traffic was heavier and later in
the season than UPS expected.
FedEx Chairman and CEO Fred Smith
said that his company handled December loads but will be careful in
managing residential e-commerce shipments.
"The biggest challenge
is the fact that so much of the business comes in such a short period of
time, and obviously it is not possible to make these enormous capital
investments for two or three weeks out of the year," Smith said on a
conference call with analysts. "You can clearly go broke trying to
deliver non-compensatory packages into people’s homes."
Customers
are limiting spending on higher-priced services. FedEx said that it was
continuing to see a shift toward less profitable international services —
the volume of international economy-class shipments rose 8 percent.
The
Memphis, Tenn.-based company is still buying back its own stock, which
reduced the number of shares by 3 percent from a year ago and boosted
earnings per share.
Helane Becker, an analyst at Cowen and Co.,
said that investors would "give the company some slack" for the
disappointing third quarter because of the slightly upbeat forecast for
the May quarter and FedEx’s moves to boost profit in its big express
operations.
FedEx shares rose 56 cents to $139.13 in morning
trading Wednesday. They began the day down 3.6 percent for this year
after gaining 57 percent in 2013.
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