Global shipping company FedEx Corp <FDX.N> on Wednesday reported quarterly results that missed Wall Street estimates as revenue declined at its biggest unit, Express Delivery.FedEx earned $500-million, or $1.57 a share, in the second quarter ended November 30, versus $438-million, or $1.39, in the same quarter last year. Analysts, on average, expected earnings of $1.64 as per Thomson Reuters I/B/E/S.
FedEx, seen as a bellwether because its results reflect economic activity, forecast a strong holiday season and full-year 2013. It sees full-year earnings per share growth between 8 per cent and 14 per cent above last year. Previously its outlook was for growth between 7 per cent and 13 per cent.
While part of that EPS growth could be attributed to the company’s repurchase of 10 million shares year to date, FedEx has also said it expects shipping volumes to pick up during the holiday season.
In October, the company forecast more than 85 million shipments during Cyber Monday week, a rise of 13 per cent over last year. Cyber Monday comes right after the U.S. Thanksgiving holiday as employees return to work and many make purchases on their office computers.
The holiday shopping season is the biggest selling period for retailers. Retailers use services like FedEx and United Parcel Service Inc <UPS.N> when customers buy online.
EXPRESS UNIT REVS DIP
FedEx said revenue at its bigger express shipping segment dipped to $6.84-billion from last year‘s $6.86-billion. The unit has suffered as clients choose slower, cheaper delivery options. FedEx has been revamping routes and trimming capacity to Asia and other international markets to stanch the decline.
However, Benjamin Hartford, an analyst of Baird & Co, said the improvement in the unit’s margins was likely to protect the stock from falling.
Operating margin was 4.8 per cent, versus 3.4 per cent last year. Operating income jumped 42 per cent to $326-million.
Total revenue was $11.40-billion, just short of analysts’ estimates of $11.43-billion.
Revenue for ground shipping, seen as the company’s growth engine, jumped 10 per cent to $2.85-billion.
Shares of the company, which were down about 3 per cent earlier in premarket trading, slipped about 0.2 per cent at $138.75 later.
The stock is up about 52 per cent year to date, while the S&P has risen about 25 per cent in the same time, according to per Thomson Reuters data.