FedEx: Economy improving but cutting 1,700 jobs

FedExStockChart.png By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- The outlook for a global economic recovery is still clouded by uncertainty, reflected by a mixed report from delivery giant FedEx Thursday.

Global logistics giant, FedEx Corp., reported a higher profit. But while the world's second-largest courier said it expects "moderate growth" in the global economy going forward, it also plans to cut 1,700 full-time employees and close about 100 facilities as it consolidates two of its divisions.

FedEx is viewed as an economic bellwether, because of both its size and global presence.

In a statement, FedEx chairman, president and CEO Frederick W. Smith cited "improved global economic conditions" as one factor boosting demand for shipping services. But on a call with investors, he also said he expects "somewhat slower economic growth going forward."

That outlook mimics the gradual recovery that the transportation industry -- and the economy as a whole -- is also pointing to, said Nate Brochmann, an analyst with William Blair & Company.

"While the rate of growth may be slower, volume continues to increase," he said. "Things are starting to gradually improve."

On Thursday, FedEx raised its forecast for the second quarter and overall fiscal year -- an encouraging sign for the economic recovery, Brochmann said. The company also said it is increasing its capital spending to $3.5 billion for the year, as it purchases more planes to keep up with continued international growth.

But its new guidance still fell short of analysts' estimates. Shares of FedEx (FDX, Fortune 500) fell more than 3% in morning trading.

FedEx also said it will cut costs by combining its freight and so-called "less-than-truckload" delivery divisions starting at the end of January, which will result in the bulk of the job losses.

The freight division lost $16 million in its latest quarter due to discounted shipping contracts, compared with profits of $2 million in the same quarter last year.

The company reported earnings per share of $1.20 for the quarter ended Aug. 31, the first quarter of its fiscal year. The results fell slightly short of analysts' expectations of $1.21 per share, according to Thomson Reuters.

However, net income was still up more than 110% over last year, to $380 million. The rise in income was driven by growing demand for express and domestic services -- two divisions that were hard hit when the recession shrunk demand for shipping goods.

Revenue at FedEx also increased 18% over the year-ago quarter, to $9.46 billion.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,814.94 -2.96 -0.02%
Nasdaq 4,758.25 3.36 0.07%
S&P 500 2,067.03 -2.38 -0.12%
Treasuries 2.26 -0.05 -2.16%
Data as of 12:25am ET
Company Price Change % Change
Apple Inc 117.60 -1.02 -0.86%
Bank of America Corp... 17.10 -0.08 -0.47%
Huntington Bancshare... 10.11 -0.07 -0.69%
Kinder Morgan Inc 40.75 -0.04 -0.10%
Ford Motor Co 15.68 0.01 0.06%
Data as of Nov 25

Sections

Jet fuel prices are down about 18% since August, but don't expect a break in your air fare any time soon. More

Retailers are repeating Black Friday deals from year to year, and offering the same discounts at other times. More

Sales of iPads and other tablets are slumping badly in 2014, and won't likely be a big hit during the holidays as they were last year. More

Ever since the Ebola epidemic erupted in her hometown of Foya, Liberia, Deboriah Foko has been working with Doctors Without Borders to inform others about this deadly virus. Here are journal entries from a day in her life. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.