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FedEx profit tumbles
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September 20, 2001: 10:54 a.m. ET
Package delivery service posts lower profit but tops forecasts
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NEW YORK (CNNfn) - FedEx Corp. posted a 36 percent drop in net profits for the latest quarter Thursday but still managed to top lowered forecasts on Wall Street by tightly controlling costs.
On June 28, FedEx warned that fiscal first-quarter results would miss Wall Street's expectations because of the struggling economy.
The overnight package delivery company said it earned $124 million, or 41 cents a share, in its first quarter ended Aug. 31, down from $169 million, or 58 cents a share, a year earlier. Analysts surveyed by earnings tracker First Call expected a profit of 31 cents a share.
The results exclude a 5 cents a share charge related to an accounting change. Including the charge, first quarter profit tumbled 36 percent to $109 million, or 36 cents a share.
Revenue increased 5 percent to $5.04 billion from $4.78 billion.
"This quarter's results reflect the competitive strength of our diversified and expanded portfolio of services, as well as outstanding expense management across all our companies," FedEx Chief Financial Officer Alan Graf, Jr. said in a statement.
Given last week's terrorist attacks on the World Trade Center and the Pentagon, FedEx said it "is extremely difficult for us to fully assess the financial effects" of those events.
Prior to the attack, FedEx said it remained comfortable with analysts' second quarter estimates, but since the attacks in which terrorists hijacked four commercial jets and crashed them into the twin towers and the Pentagon, the company's aircraft fleet was grounded, significantly impacting volumes. FedEx said it has yet to recover that volume.
"We intend to continue to manage the company's cost structure to remain profitable in the second quarter and the remainder of fiscal 2002," Graf said.
"We cannot be certain right now how the events of last week will ultimately impact the U.S. and global economies, the air transportation industry and FedEx," CEO Frederick Smith said. "Nonetheless, we see our company well positioned to significantly increase growth, profitability, returns and cash flow as the global economies improve and trading activities increase."
FedEx Ground showed strong growth in volume and yield, with average daily volume increasing 8 percent, but that weakness in manufacturing and technology weakened demand for premium services from FedEx Express where average daily volume declined 7 percent compared with a year earlier.
The company attributed increases at FedEx Ground to strong core business-to-business shipments and maintaining pricing levels.
Volume at FedEx International Priority was down 1 percent in the quarter.
FedEx also outlined a series of planned initiatives it has enacted for improving revenue and cutting costs such as transportation of priority, express and first class mail for the U.S. Postal Service last month, expansion of its home delivery network to 80 percent of the U.S. population, and an incentive program for customers who use the company's online shipping services. 
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FedEx
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