BURLINGTON, Iowa (Reuters) - Package delivery company FedEx Corp posted a quarterly loss on Wednesday due to high fuel prices, a weak U.S. economy and a previously announced write-down, and issued a weak forecast for fiscal 2009.
The news sent the company’s shares down 5 percent in premarket trading and was expected to weigh heavily on the U.S. stock market. FedEx is considered a gauge of U.S. business activity.
“For me, the shocking part is the guidance,” said Al Meyers, portfolio manager for the AHA Diversified Equity Fund, which owns FedEx shares. “The management at FedEx are straightshooters and give conservative guidance.
“This is all based on energy prices and it’s simply shocking,” he added.
The company blamed its weak fiscal 2009 forecast on the impact of high fuel prices on demand for its services.
Following the news, U.S. equity index futures tumbled to their low of the session and government bond prices rallied back from overnight losses. The yield on the benchmark 10-year U.S. Treasury, moving inversely to its price, fell back below 4.2 percent.
Memphis-based FedEx reported a fiscal 2008 fourth-quarter loss of $241 million, or 78 cents a share, compared with a profit of $610 million, or $1.96 a share, a year earlier.
Excluding a one-time charge of $891 million, FedEx reported earnings of $1.45 a share. Analysts’ average forecast was $1.47, according to Reuters Estimates.
The charge was related to a name change for FedEx Kinko’s. Earlier this month FedEx said it was changing the name of FedEx Kinko’s -- which has struggled in recent quarters as its core copy print business has underperformed -- to FedEx Office. FedEx bought Kinko’s in 2004.
“Record-high fuel prices and the weak U.S. economy dampened volume growth and substantially affected our bottom line,” Chief Executive Fred Smith said. “We will continue to reduce expenses to match volume and revenue expectations.”
Revenue in the fourth quarter rose 8 percent to $9.87 billion. Analysts had expected $9.51 billion.
FedEx and its main rival, Atlanta-based United Parcel Service Inc, are both seen as bellwethers of U.S. economic activity. UPS shares were down 3 percent in premarket trading.
FedEx said it expects fiscal first-quarter earnings of 80 cents to $1.00 a share. Analysts expect $1.35.
The company said it expects full-year fiscal 2009 earnings of $4.75 to $5.25 per share. Analysts’ average forecast is $5.98.
“This guidance incorporates the current high fuel prices and the related impact on fuel surcharges, which are reducing demand for FedEx services and impacting yield across the company’s transportation segments,” FedEx said in a statement.
Peter Kenny, managing director at Knight Equity Markets, said FedEx is in the “unique space of not only having higher fuel costs for trucking, but they’re also in the airline space, so they’re facing an enormous challenge to deliver on revenue growth and cost containment.”
Reporting by Nick Carey, editing by Maureen Bavdek and John Wallace
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