Fed Ex doesn't deliver
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September 16, 1999: 12:01 p.m. ET
Overnight delivery company cites fuel prices, warns on remainder of year
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NEW YORK (CNNfn) - Shares of FDX Corp. tumbled Thursday, after the holding company for overnight delivery service Federal Express missed Wall Street's first quarter earnings expectations and warned on the rest of the year.
By late morning, the Memphis, Tenn.-based company's stock slipped 5-15/16 to 37-3/4.
FDX (FDX) posted earnings of 52 cents per share. Analysts polled by First Call Corp. were expecting the company to report 54 cents per share. The company earned 50 cents per share in the year-ago period.
Net income was $159 million, up from last year's $149 million. Operating income was $284 million, level with a year ago, and revenue rose 6 percent to $4.3 billion.
Alan B. Graf Jr., executive vice president and chief financial officer, said higher fuel prices and declining sales of hushkits -- noise reduction units for older jets designed to extend their operating lives -- hurt operating income in the quarter by $27 million.
FDX stock activity over the last year
He said average U.S. domestic daily package volume at Federal Express and its RPS Inc. subsidiary, North America's two largest package express carriers, grew 3 percent and 4 percent, respectively, both below expectations for the quarter.
Graf said management at both companies has introduced stringent cost controls and productivity enhancement programs.
Even so, Graf said, if current trends continue, fuel prices alone could add $150 million to fiscal 2000 operating costs compared with 1999.
Graf said that if U.S. domestic growth continues to slow, earnings for the second quarter and full fiscal year may fall below analysts' expectations, and FDX may not achieve double-digit operating income growth for the year.
Tom Burnett, president of Merger Insight Inc., said FDX was hit by "a combination of negatives."
"I think the stock was overheated," he said. "It had run up a lot earlier this year on the Internet wave, because they actually deliver the things people order on the Web. The costs are going up on jet fuel prices and they missed expectations."
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Federal Express
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