Package delivery giant FedEx Corp. (FDX) is scheduled to report third-quarter results before the market opens Thursday. The Memphis, Tennessee-based company's performance is a barometer of the economic recovery, as the manufacturing sector is heavily reliant on the transportation industry.
The company operates in four segments: FedEx Express, FedEx Ground, FedEx Freight and FedEx Services. For the fiscal year ended May 31, 2009, 63% of the company's total revenues came from the FedEx Express segment, while FedEx Ground generated nearly 20%. FedEx Freight segment contributed over 12% to total revenue in the fiscal, and nearly 6% came from FedEx Services division.
FedEx, based in Memphis, Tennessee, witnessed a tough period in the recent past, as manufacturing in the economy decreased to balance the piling inventory due to the decline in demand brought about by the recession. Additionally, customers began to prefer cheaper ground services to more money-making express services. To tide over the crisis, the Dow component implemented several cost-cutting measures, including reduction of personnel and work hours as well as reduction in network capacity. These measures are expected to reduce expenses by about $1 billion in fiscal 2010.
In the second quarter of the current fiscal, the company said that an improvement in global economy drove its shipment growth and reported a 6% rise in its International Priority Package volume. Sounding cautiously optimistic about the near future, Alan Graf Jr., FedEx Corp. executive vice president and chief financial officer, said, "While there is some uncertainty regarding the sustainability of current demand trends after our peak shipping season, we expect our strong operating leverage to provide improved year-over-year profitability in the second half of our fiscal year.''
For the third quarter, FedEx expects earnings in a range of $0.50 to $0.70 per share. On average, twenty analysts polled by Thomson Reuters expect FedEx to have earned $0.72 per share in the quarter, with estimates ranging between $0.57 and $0.82 per share. Revenues for the quarter are estimated to be $8.37 billion. Analysts' estimates typically exclude special items.
It is also perceived that FedEx may report earnings exceeding analysts' expectations as shipments in Asia have strengthened due to the uptick in the economy.
For the third quarter of the previous fiscal, the company's net income was $97 million or $0.31 per share. Revenue for the quarter totaled $8.137 billion.
For the second quarter ended November 30, 2009, FedEx reported a 30% year-over-year decrease in profit, hurt by a drop in operating margins as well as a 10% revenue decline. The company's net income was $345 million or $1.10 per share for the second quarter. Total revenue for the quarter decreased 10% to $8.60 billion.
FedEx said in December 2009 that it expects earnings in the range of $3.45 - $3.75 per share for fiscal 2010. The company is likely to update this outlook today.
United Parcel Service (UPS), the world's largest package delivery company, last month reported a surge in fourth-quarter profit, helped by the absence of prior-year charges and strong performance in its international operations. Revenues, however, slipped 2.5% from the prior year. Looking ahead, UPS said economic forecasts indicate gradual improvement as 2010 unfolds. The company noted that the first quarter would be the most challenging of the year for UPS with profitability only slightly better than last year.
In early February, UPS announced plans to furlough at least 300 of its airline pilots, out of its total of 2,800 pilots. At that time, UPS Airlines President Bob Lekites, said, "Even though the economy has begun to turn around, UPS anticipates a very gradual recovery and a continued need for belt-tightening. This is a painful decision for our people, but one that is right for the on-going health of our business."
FDX closed Wednesday's regular trade at $89.80, up $1.17 or 1.32%, on 4.89 million shares, above its 50-day and 200-day moving averages. For the past year, the stock traded in the range of $41.10-$92.59.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.