Heavy snow in the USA and Europe and soaring oil prices will cause profits for the December 2010– February 2011 third quarter to slip back, FedEx warned yesterday.
Both regions have experienced severe winter weather that has disrupted operations dramaticallyand driven up costs since December. At the same time, oil prices have risen sharply over the lastfew months.
FedEx announced that Q3 earnings have been negatively impacted by an estimated $0.25 per dilutedshare due to loss of revenue and increased expenses resulting from severe winter storms andhigher-than-expected fuel prices.
The company now expects as-adjusted earnings, excluding FedEx Freight combination costs, of$0.70 to $0.90 per diluted share for the third quarter ending February 28, compared to thecompany’s previous guidance of $0.95 to $1.15 per diluted share. In comparison, the companyreported earnings of $0.76 per diluted share in last year’s third quarter. This guidance assumes nofurther weather impact and stable fuel prices for the remainder of the quarter, FedEx added.
The higher costs will also impact earnings guidance for the full year, which the company willupdate when it announces third quarter earnings on March 17, 2011. At present, FedEx has projectedearnings of $5.00 to $5.30 per diluted share for fiscal year 2011.
“We experienced significant network disruptions in the USA and Europe and unusually high costsfrom severe winter storms. In addition, fuel prices continued to escalate since we provided ourearnings outlook in December,” said CFO Alan Graf.
He stressed, however: “We continue to see strength in our base business across alltransportation segments and geographies. I would like to take this opportunity to thank all ourteam members for their hard work and dedication during the recent severe weather events.”
The FedEx share price did not react strongly to the profit warning, closing down 1.50% at$93.99.
UPS executives also referred to the severe weather conditions during the Q4 results analystscall at the start of this month. The UPS stock dropped slightly by 0.69% to $74.80 yesterday. TNTwarned earlier this month that severe weather in December would reduce its Q4 Express operatingprofits by €15 million.
