FedEx profit forecast lower than expected

FEDEX, OPERATOR of the world’s largest cargo airline, predicted lower first-quarter profit than analysts estimated amid slowing economic growth in the US.

Profit excluding some items for the three months to the end of August will be $1.45 (€1.14) to $1.60 a share, the Memphis, Tennessee-based company said yesterday in a statement.

FedEx, an economic bellwether because it carries everything from mobile devices to pharmaceuticals, predicts US economic growth of 2.2 per cent for the fiscal year to May 31st, said company spokesman Jess Bunn. That was down from a forecast of 2.3 per cent in December, he added.

“What the numbers suggest is that shippers are being exceptionally careful with how they spend money right now in terms of moving freight,” said Jefferies analyst Peter Nesvold. “There’s a heightened sense of cost control among the shipper community.”

Weak air freight traffic on routes from Asia to North America and Europe hurt the company during the fiscal fourth quarter to May 31st, said industries analyst Lee Klaskow.

The company is planning a restructuring of its Express business to cut capacity as Europe’s sovereign-debt crisis dampens US shipping demand.

Average daily package volume in the US fell 4.9 per cent in the company’s fourth quarter, a more rapid decline than in the three months to the end of February, FedEx said. On the same basis, international priority shipments also dropped more rapidly, falling 3.4 per cent compared with 1.1 per cent in the prior three-month period.

FedEx said it was “optimistic about what international priority volumes would look like this quarter and it looked like there would be growth”.

Economists at Morgan Stanley in New York cut US GDP forecasts for 2012 and 2013 last week in part because of the intensification of the European debt crisis. The US will expand 2 per cent this year, down from a previous estimate of 2.3 per cent, and 1.7 per cent next year rather than 2 per cent, Morgan Stanley said.

FedEx net income for the fiscal fourth quarter fell 1.4 per cent to $550 million, from $558 million a year earlier. – (Bloomberg)