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FedEx slashes forecast, citing weak global economy
September 4, 2012 / 9:36 PM / in 5 years

FedEx slashes forecast, citing weak global economy

(Reuters) - FedEx Corp (FDX.N), the world’s second-largest package delivery company, cut its profit outlook for the current quarter, saying weakness in the global economy was hurting demand for overnight international shipments more than anticipated.

A man walks past a FedEx vehicle at the company's office in Dubai October 30, 2010. REUTERS/Ahmed Jadallah

The new forecast pushed FedEx shares down 3.5 percent in after-hours trading.

For its first fiscal quarter ended August 31, Memphis, Tennessee-based FedEx expects to earn $1.37 to $1.43 per share. The company previously expected earnings of $1.45 to $1.60 per share for the period. Analysts expect earnings of $1.56 per share, according to Thomson Reuters I/B/E/S.

Revenue at the FedEx Express business, the company’s largest and which transports parcels internationally, has been affected by “weakness in the global economy,” the company said in a statement.

A FedEx spokesman declined to say which regions are the most affected, but added that more detail will be available when quarterly results are released on September 18.

“If you look at the recent international trends, they’ve certainly been weaker,” William Blair & Co analyst Nathan Brochmann said. “I really don’t think this is a terrible shock.”

The lower forecast comes after rival United Parcel Service Inc (UPS.N) lowered its 2012 earnings forecast in July and capacity in Asia, bemoaning ”global economic uncertainty.

FedEx’s last quarterly earnings report in June fell short of expectations and the company promised it would respond by cutting expenses and boosting margins at FedEx Express.

But Tuesday’s forecast cut effectively means the company was unable to boost margins in that unit amid the tough economic landscape.

The massive volume of goods moved by FedEx makes its shipping trends a closely watched indicator of consumer demand and economic growth. Moderate global economic growth that keeps shippers conservative will continue into the next year, FedEx said.

Reporting By Ernest Scheyder. Editing by Andre Grenon

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