BackFedEx 2015 profit forecast tops estimates on rising growth
The operator of the world's largest cargo airline predicted a pickup in domestic and global economic growth
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Dallas: FedEx Corp. forecast an annual profit that topped some analysts’ projections as it reaps the benefits of a 20-month push to reduce costs and a global economic recovery that’s spurring an increase in shipping.
Earnings for the current fiscal year ending in May will be $8.50 to $9 a share, the Memphis, Tennessee-based company said in a statement on Thursday. That compares with the average of $8.73 among 27 analysts surveyed by Bloomberg and the stock rose the most in more than two years.
The operator of the world’s largest cargo airline predicted a pickup in domestic and global economic growth. US gross domestic product will expand by 3.1% in 2015 following this year’s 2.2% gain, while the worldwide figure of 3.1% will build on 2014’s 2.7% increase, FedEx said.
“The amount of freight and packages are looking pretty good, and that’s a good indication for the economy," said Logan Purk, a St. Louis-based analyst at Edward Jones & Co., in an interview following the results.
FedEx is seeing efforts pay off from a $1.7 billion cost-reduction plan initiated in October 2012 in part to help offset a growing shift of customers away from expensive overnight shipments to slower, cheaper options.
The company is parking older, less fuel-efficient planes sooner than it planned, reducing headcount by 3,600 through a voluntary buyout and shedding 5,000 older vehicles to help meet its cost reduction goals. FedEx has said most of the benefits would be achieved by fiscal 2015.
FedEx express
About $1.6 billion of the plan is coming from FedEx Express, the largest unit, where revenue growth from costly international priority shipments has slowed. The company twice has pared aircraft capacity between the US and Asia to help adjust to the switch.
“Management’s willingness to issue bold guidance underscores the progress that has been made in turning around the ailing Express segment," Kelly Dougherty, a Macquarie Capital Inc. analyst in New York, said in a report to clients.
Dougherty rates FedEx outperform and Purk rates it hold.
FedEx rose 6.2% to $148.95 in New York, it’s biggest gain since December 2011. The move leaves FedEx with a 3.6% increase so far this year, trailing the 5.9% gain for the Standard and Poor’s 500 Index.
E-commerce growth
Fourth-quarter revenue rose 0.3% at FedEx Express as package volume increased 2%. For ground shipments, the average daily volume grew 8%, driven by growth in e-commerce. Daily freight shipments jumped 12%.
Operating income at FedEx Express rose 3% to $475 million as revenue increased less than 1% to $7 billion. International economy shipments grew 5%.
FedEx reported a fiscal fourth-quarter profit of $2.46 a share, exceeding analysts’ estimates of $2.36. Revenue of $11.8 billion also topped analysts’ expectations.
FedEx’s US economic forecast for 2015 marked an increase of 0.1 percentage point from a previous projection. The company gets 71% of its revenue from the US. The unemployment rate in the US will drop to 6.3% this year from 7.4% last year, and to 5.5% by 2016, according to data compiled by Bloomberg. Bloomberg
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