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FedEx warns on 4Q, 1Q
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May 7, 2001: 11:39 a.m. ET
Express delivery leader says slowing economy, tech shipments hit revenue
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NEW YORK (CNNfn) - FedEx Corp. warned Monday that it will miss fiscal fourth-quarter and first-quarter earnings forecasts, blaming the slowing economy and cutbacks by tech customers for reduced revenue.
The Memphis, Tenn.-based express carrier said it will earn 50 to 60 cents a share in the quarter ending May 31. Analysts surveyed by earnings tracker First Call had forecast earnings of 69 cents a share in the period, which already was down from 85 cents a share it earned in the year-earlier period.
The company also warned it expects earnings in its fiscal first quarter that begins June 1 to be "significantly below" year-earlier results of 58 cents a share. First Call forecasts for the period call for 57 cents.
The warnings sent FedEx (FDX: down $1.08 to $40.20, Research, Estimates) shares down slightly Monday.
"Deteriorating economic conditions and the rapid decline in the high-tech and other durable goods industries have increasingly affected FedEx Express volumes," CFO Alan Graf said. Revenue for overnight and two-day shipments fell 9 percent in April from the year-earlier period, while international express shipments revenue gained only 1 percent, less than forecast.
This is the second straight quarter the company has had to warn about results, each time blaming the state of the U.S. economy.
When the company released third-quarter results that edged past lowered forecasts for the period, it said it still was confident it would earn between 85 and 90 cents a share in the fourth quarter, which put it at or above analysts' forecasts at that time.
But those forecasts had been dropping steadily since the April earnings statement, and future earnings estimates are likely to keep dropping as well, said Bear Stearns analyst Ed Wolfe, who lowered his fiscal 2002 forecast for the company. He said he now expects earnings between $1.75 and $1.80 a share next year, well below his earlier forecast of $2.25 and the consensus forecast of $2.70 for the year.
"We continue to believe that while domestic express volumes may be close to a bottom, ground volumes, (international express shipments) and especially yields are several quarters away from bottoming," Wolfe said in a note Friday. He said he believes FedEx shares could fall as low as $30 during the coming months.
Competitor United Parcel Service Inc. (UPS: down $0.64 to $57.44, Research, Estimates) also has issued earnings warnings the last two quarters, citing the slowdown in shipments.
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"Clearly, further weakening in domestic express and international volumes is not a good sign for UPS as well," Wolfe said, adding that some earnings forecasts there could be lowered in the future.
FedEx said pricing remains good despite the softness in shipments and that it continues to cut capital spending and other expenses in response to the market. But it said it believes the current softness in shipments will continue into its next fiscal year.
Shares of FedEx (FDX: Research, Estimates) lost 7 cents to $41.28 Friday ahead of the warning. 
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