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VOL. 37 | NO. 24 | Friday, June 14, 2013
FedEx 4Q profit drops as priority services lag
DALLAS (AP) — FedEx Corp.'s fourth-quarter profit fell 45 percent as international customers traded down to less-expensive delivery options.
Excluding charges, the results still beat Wall Street expectations. But the company's forecast for the next 12 months was shy of Wall Street forecasts and shares fell in premarket trading.
The world's second-largest package delivery company said Wednesday that it earned $303 million, or 95 cents per share, in the fourth quarter ended May 31. That's down from $550 million, or $1.73 per share, a year ago.
FedEx said that excluding restructuring costs and an aircraft write-down, it would have earned $2.13 per share, which beat analysts' forecast of $1.96 per share in adjusted earnings.
The company is trying to cut annual spending by $1.7 billion by 2016. The steps include buyouts intended to reduce the work force by at least 10 percent by May 2014.
FedEx said Wednesday that about 3,600 employees who applied for a buyout will leave the company. Of those, 40 percent left on May 31.
Severance and other restructuring costs totaled $496 million, or 98 cents per share, after taxes. The company also took a write-down of $100 million, or 20 cents per share, as it retired 10 airplanes during the quarter.
For the fiscal year that started June 1, the company forecast that adjusted earnings will grow between 7 percent and 13 percent. That would suggest a range of $6.67 to $7.04 per share. Analysts surveyed by FactSet were expecting $7.28 per share in the new year.
Fourth-quarter revenue rose 4 percent to $11.44 billion, just below analysts' forecast of $11.46 billion.
The shares fell 54 cents to $98.94 in premarket trading. Through Tuesday, they had gained 8.5 percent so far in 2013.
Chairman and CEO Fred Smith said the company's ground-services business remained strong and margins improved in the freight business during the fourth quarter.
"These positive developments did not fully offset tepid economic growth and customer preference for less costly international shipping services," Smith said in a statement issued by the company.
FedEx Express plans to further cut delivery capacity between Asia and the United States in July.
FedEx delivers shipments from businesses to consumers and other companies. Because its customers span so many industries, it's often seen as an economic bellwether.
The Memphis, Tenn.-based company has been dealing with a slump in high-end express-delivery services as customers try to save money by picking cheaper but slower shipping options.