Shipping company FedEx (FDX), often viewed as a bellwether for the economy, reported that its fiscal first quarter earnings more than doubled to $380 million, or $1.20 per share, from $181 million, or 58 cents per share, it earned a year ago. But results were a penny shy of analyst expectations and shares fell nearly 3% in premarket trading.
"Strong demand for our services resulted in higher volumes and better revenue per shipment at FedEx Express and FedEx Ground," said Chairman, President and CEO Frederick Smith. "This increased demand comes from improved global economic conditions," he added, as well as the improvements the company made during the downturn.
In its fiscal 2010 first quarter ended August 31, FedEx revenue jumped 18% to $9.46 billion from $8.01 billion the previous year. Also, it reported operFating margin of 6.6%, up from 3.9% the previous year.
1,700 Workers Are Out of Luck
FedEx said the strong earnings were the result of strong FedEx International Priority growth at FedEx Express, continued growth at FedEx Ground and a benefit from the net impact of higher fuel surcharges. But expenses related to employee compensation programs, pension, and medical cost, as well as aircraft maintenance expenses, and an operating loss at FedEx Freight dampened the quarter's solid results.
The company also announced that it would combine its FedEx Freight and FedEx National LTL operations effective January 30, 2011 to increase efficiencies and reduce operational costs. While FedEx said this would significantly improve profitability in the segment by 2012, the move will also result in 1,700 job cuts as it shuts 100 facilities.
Going forward, FedEx raised its projected earnings in the second quarter to $1.15 to $1.35 per share in the second quarter, but that was still below analyst estimates of $1.37. FedEx also raised earnings for fiscal 2011 to a range of $4.80 to $5.25 per share, up from the company's previous estimate of $4.60 to $5.20 per diluted share.