(Reuters) - Package delivery company FedEx Corp FDX.N said on Wednesday its expects to incur roughly $350 million in integration costs related to its acquisition of Netherlands-based TNT Express during 2018, some $75 million higher than previous estimates.
The Memphis-based company also said a June cyber attack on the Dutch unit will continue to hurt revenue through its second fiscal quarter and full-year fiscal 2018 and force bigger investments in information technology.
FedEx joins a string of companies that reported big drops in earnings because of the NotPetya virus, which hit on June 29, crippling Ukraine businesses before spreading worldwide to shut down shipping ports, factories and corporate offices.
FedEx said in filings its second-quarter results will be hurt by the integration of TNT Express, which it acquired last year for $4.8 billion. It expects integration and restructuring costs over the four years to be roughly $800 million, and expects to incur approximately $350 million of these costs during 2018.
“Our expected 2018 integration expenses are approximately $75 million higher than our previous estimates, as we are accelerating portions of our TNT Express integration given the recent cyber attack,” FedEx said.
FedEx Corp on Tuesday reported a lower-than-expected quarterly net profit due to the cyber attack, the impact of Hurricane Harvey and higher costs, and also lowered its full-year earnings forecast.
While the company has made progress restoring operations at TNT Express, its revenue, profit and volumes remain below pre-attack levels, FedEx said. It said it expects ongoing, but diminishing, financial impacts through the remainder of 2018.
Shares of FedEx, often considered a bellwether for the U.S. economy, dipped more than 2 percent in after-hours trading on Tuesday. The shares touched a record high on Wednesday and closed at $220.50, up 2.1 percent.
Investors were assured by the company’s improved operating profit targets for Express - the unit absorbing TNT - of $1.2 billion to $1.5 billion in 2020 from 2017, said Edward Jones analyst Logan Purk.
“FedEx is still a well-oiled machine and there is a lot of value to be had in its shares,” Purk said.
FedEx expects TNT’s IT capabilities to be restored by the end of September, enabling business-as-usual operations in time for the holiday peak shipping season, FedEx spokesman Jess Bunn said.
Reporting by Eric M. Johnson in Seattle; Editing by Lisa Shumaker and Matthew Lewis
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