FedEx made higher profits than expected in the first quarter ended August 31, 2009, thanks tobetter express volumes and cost reductions. The surprising news drove up the share prices of all
four global integrators on Friday to 11-month highs and increased hopes about a global economicrecovery.In a short statement on Friday ahead of its full Q1 results on Thursday September 17, FedExannounced that it expects to report earnings of $0.58 per diluted share for the first quarter, down53% from $1.23 per diluted share a year ago. The company’s guidance for the quarter had been $0.30to $0.45 per diluted share.
The US integrator added that it expects earnings to be $0.65 to $0.95 per diluted share inthe second quarter, which reflects the current outlook for fuel prices and a continued modestrecovery in the global economy. A substantial decline is expected from $1.58 per diluted share ayear ago, as the company significantly benefited from rapidly declining fuel prices and the timinglag that exists between when fuel prices change and when indexed fuel surcharges automaticallyadjust.
“FedEx first quarter financial performance exceeded our guidance thanks tobetter-than-expected FedEx International Priority volume, strict cost management and solidexecution of our strategy,” said Alan B. Graf, Jr., FedEx Corp. chief financial officer.International Priority is FedEx’s premium international express service.
He added: “Despite some encouraging signs in the global economy, it is difficult to predictthe timing and pace of any economic recovery. Revenue per shipment declined year over year in eachof our transportation segments, as fuel surcharges declined significantly and we continue to face avery competitive pricing environment combined with significant overcapacity in the LTL freightmarket.”
The news surprised the financial markets and encouraged good demand for express companyshares on Friday. FedEx closed up 6.4% at $77.32 as investors read the figures to mean thefinancial outlook for the market leaders might be improving. This was its highest share price sinceearly October 2008.
The shares of the main competitors also benefited from the positive news. UPS shares were up4.4% at $58.80, also their highest level for the last 11 months. Deutsche Post DHL closed up 3.5%at €12.70 and TNT rose 3.1% to €18.74. Similarly, these were their highest share prices since lastOctober.
