FedEx earnings plummet

Global - FedEx said net income plunged 22% to US$384 million in the first quarter, as strong cost management actions were more than offset by global economic weakness, higher fuel prices and the related negative effects of higher fuel surcharges.

The global freight forwarder has announced US$9.97 billion in revenue for the first quarter, an increase of 8% from US$9.20 billion last year. The company’s operating income dropped 23% from US$814 million the year before to US$630 million. Operating margin dipped 2.5% from last year to 6.3%. While the net income of US$384 million was a plunge of 22% from last year’s US$494 million.

Frederick W Smith, FedEx Corp. chairman, president and CEO said, “Global economic conditions are challenging, but FedEx is taking strong and proactive actions to manage through this difficult cycle; we are committed to implementing strategies that will enhance the customer experience, gain market share, reduce expenses, improve profits and ensure the long-term success of the company.”

According to FedEx, their combined average daily package volume for the quarter, in the FedEx Express and FedEx Ground segments, grew 1% year-on-year. In contrast, growth in ground, FedEx SmartPost® and international domestic express shipments was substantially offset by a continued decline in US domestic express shipments.

FedEx expects earnings of between US$1.40 -US$1.60 per diluted share in the second quarter compared to US$1.54 last year.

For the full financial year, FedEx has estimates growth of between US$4.75-US$5.25 per diluted share.

FedEx has also announced an increase in shipping rates from 5 January, 2009 for FedEx Express by an average of 6.9% for the US and US export services. The rate increase will be partially offset by adjusting the fuel price at which fuel surcharge begins, reducing the fuel surcharge by 2 percentage points, said FedEx.

Michael T Glenn, FedEx executive vice president, Market Development said, “Customer service is a top priority at FedEx; the pricing adjustment will allow FedEx to continue making key investments in our business so we can focus on the needs of our customers.”

Besides an increase in FedEx Express package and freight rates, rates to Puerto Rico FedEx Express US, FedEx International Premium® will also change. As will FedEx International Priority® and FedEx International Economy® minimum rates.