DOW JONES NEWSWIRES
FedEx Corp.'s (FDX) fiscal fourth-quarter loss widened on
higher-than projected write-downs related to its Kinko's business
as demand slumped and the shipping giant projected earnings this
quarter far below analysts' views.
Shares fell 1.8% at $50.50 in premarket trading.
For the current quarter, FedEx expects earnings of 30 cents to
45 cents a share. Analysts polled by Thomson Reuters projected 68
cents.
Chief Financial Officer Alan B. Graf Jr. said the operating
environment through November is expected to be "extremely
difficult" as manufacturing activity is expected to be down
year-over-year through the summer. Recent increases in fuel prices
will hurt this quarter's results, he added.
Chairman and Chief Executive Frederick W. Smith added, "There
are signs that the worst of the recession is behind us, and we
remain optimistic that we will see quarter-over-quarter economic
improvement later this calendar year."
The company, often considered a bellwether for the U.S. economy
because of its massive shipping volume, has struggled during the
economic downturn as orders and sales slow across a range of
industries. In recent months, FedEx has cut jobs and reduced
capacity at its express and freight segments to deal with the
slowdown.
For the period ended May 31, FedEx posted a loss of $876
million, or $2.82 a share, compared with a year-earlier loss of
$241 million, or 78 cents a share.
The latest results included $1.2 billion in write-downs on its
2004 acquisition of Kinko's Inc., more than the company's estimate
of $810 million earlier this month. They lend credence to views
that FedEx blundered with the $2.4 billion Kinko's purchase.
Combined with an $891 million write-down in the year-ago quarter,
the charge means FedEx will have taken write-downs totaling more
than 70% of the purchase price.
Excluding items, earnings fell to 64 cents from $1.45. In March,
the company projected earnings of 45 cents to 70 cents, below
analysts' expectations at the time.
Revenue decreased 20% to $7.85 billion.
Analysts surveyed by Thomson Reuters recently expected earnings
of 51 cents and revenue of $8.32 billion.
FedEx's express segment saw average daily volume fell 3.4%,
including a 2% drop in U.S. domestic express-package volume.
Revenue per package fell 19% on lower fuel surcharges and weight
per package. Daily volume at the ground segment was flat; the
business was aided by last year's closing of competitor DHL.
Along with the economic woes, the company also faces a challenge
from proposed federal legislation that would make it easier for its
workers to unionize. It said last week it is launching what it
calls a multimillion-dollar campaign to derail the legislation.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com