Manila Bulletin

FedEx low­ers fis­cal 2016 in­come out­look


DAL­LAS (AP) – FedEx re­ported dis­ap­point­ing re­sults for its latest quar­ter, and the de­liv­ery gi­ant cut its full-year profit forecast on weaker de­mand for freight ser­vices and higher costs in its ground di­vi­sion.

The com­pany also said it plans to hire more than 55,000 sea­sonal work­ers for the hol­i­days, an in­crease of at least 5,000 over last year’s plan. Its shares fell nearly 3 per­cent. FedEx Corp. said that it ex­pects to earn be­tween $10.40 and $10.90 for the fis­cal year that ends next May, down 20 cents from an ear­lier pre­dic­tion. An­a­lysts ex­pected $10.84, ac­cord­ing to a sur­vey by Fac­tSet.

The re­duced out­look comes de­spite cost-cut­ting moves, growth in online com­merce, and up­com­ing price hikes. Rates for ex­press, ground and freight ship­ments will rise by av­er­age 4.9 per­cent on Jan. 4, and sur­charges for over­sized pack­ages will go up in Novem­ber, be­fore the peak hol­i­day sea­son.

Chair­man and CEO Fred Smith said the Mem­phis, Ten­nessee-based com­pany was “per­form­ing solidly given weaker-than-ex­pected eco­nomic con­di­tions, es­pe­cially in man­u­fac­tur­ing and global trade.”

Smith blamed the earn­ings miss and the lower profit forecast on FedEx rais­ing its set-aside for self-in­sur­ance as its driv­ers cover more miles in more trucks.

“The whole thing about the quar­ter is one is­sue; it’s a self-in­sur­ance re­serve,” he said on a con­fer­ence call with an­a­lysts. “All the rest of the stuff is just noise and var­i­ous is­sues in­side the op­er­at­ing com­pany.”

An­a­lysts pointed out that the self­in­sur­ance re­serve has hurt re­sults two straight quar­ters. FedEx did not pro­vide a fig­ure for the higher in­sur­ance re­serve, but a spokesman said it was in­cluded in a line for “other” costs that to­taled $453 mil­lion in the quar­ter, an in­crease of $201 mil­lion from a year ear­lier.

Smith also com­plained that FedEx didn’t set earn­ings tar­gets; an­a­lysts did. The com­pany could be pay­ing the price for be­ing a long­time Wall Street fa­vorite.

“When you be­come beloved by the Street, the down­side is it’s harder and harder to meet those el­e­vated ex­pec­ta­tions,” said Lo­gan Purk, an an­a­lyst with Ed­ward Jones. “That’s part of the rea­son that FedEx has missed (earn­ings fore­casts) the last cou­ple quar­ters.”

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