FedEx Reduces Earnings Forecast

FedEx Corporation (NYSE:FDX) a market bellwether cut its full year profit forecast as demand for its services dropped in the United States and Asia.

According to a Bloomberg survey, FedEx is reporting the per share earnings will be $6.25 to $6.75, or $.10 lower than the previous range. Analysts had projected $6.35.

FedEx is the world’s largest cargo airline by traffic. According to a company statement, U.S. shipments fell for the second quarter in a row as the economy continued a painfully slow crawl. The “rapid decline in demand” for FedEx Express services, particularly from Asia, outpaced FedEx’s ability to reduce operating costs, Chief Financial Officer Alan Graf said in the statement.

U.S. shipments declined 3% at FedEx last quarter, as the global economy “grew at a slower rate than we anticipated,” Graf said. Volumes for packages sent between countries fell 4%, FedEx said.

FedEx has said it was cutting costs and capacity to match a weaker demand environment that the International Air Transport Association warned could last until mid 2012.

The company also spent more on jet fuel, which cost 40% more in the period. FedEx usually has a two month delay in recovering fuel costs through surcharges.

FedEx has invested heavily in new aircraft to expand its Asian network, and the company’s key role in shipping everything from industrial components to consumer electronics make it a closely-watched bellwether of economic sentiment.

FedEx Corporation (FedEx), is a holding company. It provides a portfolio of transportation, e-commerce and business services under the FedEx brand. The Company operates in four segments: FedEx Express, FedEx Ground, FedEx Freight and FedEx Services.

written by

Rachel Brook is an up and coming financial writer focusing on commodity price inflation and how the overall market reacts to the price swings. She also covers emerging markets in Africa and SE Asia.

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