Package delivery giant FedEx Corp. (FDX) reported Tuesday profit for the first quarter that edged down from last year, hurt by drop in operating performance at FedEx Express. However, both earnings per share and quarterly revenues topped analysts' expectations.
FedEx also issued earnings guidance for the second quarter, significantly below Street view, and slashed its earnings outlook for the full-year 2013.
The expectations were dampened after FedEx issued a profit warning just weeks ago as economic softness was stifling growth at its air cargo unit FedEx Express.
The FedEx Express unit is the largest cargo airline which engages in the global delivery of packages and freight. The economic weakness in the U.S., persistent sluggishness in Europe, and weakness permeating elsewhere have impacted revenue growth more-than-expected at FedEx Express.
In order to overcome the weakness, the company announced that FedEx Express will increase shipping rates by a net average of 3.9 percent for U.S. domestic, U.S. export and U.S. import services effective January 7, 2013. FedEx Freight implemented a 6.9 percent general rate increase on July 9, 2012.
Meanwhile, the company added that FedEx Ground and FedEx SmartPost pricing changes for 2013 will be announced later this year.
The performance of package shipping bellwethers like FedEx and its rival United Parcel Service, Inc. (UPS) are generally considered a strong barometer of overall consumer attitude and business confidence due to the large number of shipments they handle for consumers worldwide.
"As we announced on September 4, weakness in the global economy constrained revenue growth at FedEx Express during our first quarter and affected our earnings," Chairman, President and CEO Frederick Smith said in a statement.
The Memphis, Tennessee-based FedEx, a Dow component, reported net income of $459 million or $1.45 per share for the first quarter, lower than $464 million or $1.46 per share in the prior-year quarter.
On average, 24 analysts polled by Thomson Reuters expected the company to report earnings of $1.40 per share for the quarter. Analysts' estimates typically exclude special items.
Total revenue for the quarter increased 3 percent to $10.79 billion from $10.52 billion in the same quarter last year, and topped nineteen Wall Street analysts' consensus estimate of $10.70 billion by a whisker.
Revenues for FedEx express edged up 1 percent to $6.63 billion, and FedEx ground revenues grew 8 percent to $2.46 billion from last year. Revenues for FedEx freight increased 5 percent to $1.40 billion, while FedEx services revenues declined 5 percent to $389 million from last year.
Operating margins for the quarter edged down 10 basis points to to 6.9 percent from last year's 7.0 percent.
Capital expenditures for the quarter decreased 12 percent to $972 million from $1.11 billion in the year-ago quarter.
Looking ahead to the second quarter, FedEx expects earnings in a range of $1.30 to $1.45 per share, while analysts expect the company to report earnings of $1.67 per share.
For fiscal 2013, the company slashed its earnings guidance to a range of $6.20 to $6.60 per share from $6.90 to $7.40 per share. Street is looking for full-year 2013 earnings of $7.04 per share. The capital spending forecast for fiscal 2013 is maintained at $3.9 billion.
FDX closed Monday's regular trading session at $89.28, down $0.43 on a volume of 2.38 million shares, higher than the three-month average volume of 1.94 million shares. In the past 52-week period, the stock has been trading in a range of $64.07 to $97.19.
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