FedEx Looks to Deliver Solid Gains in Its Latest Quarter

FedEx package delivery
FedEx package delivery

FedEx (FDX) will likely show an increase in fiscal second-quarter earnings of about 20% from a year earlier when it releases its latest report on Thursday. The world's largest air-cargo carrier is looking for a jump in revenue to more than offset the impact of increasing costs for jet fuel and other items.

FedEx is expected to have earned $1.31 a share, according to the average analyst estimate in a Thomson Reuters poll. That would be up from $1.10 in last year's fiscal second quarter. Revenue increased about 13% to $9.7 billion, according to analysts.

The Memphis-based company is expected to benefit from what appears to be a rebound in both consumer and business spending, which has increased shipping volumes. A Bloomberg survey released last week found that consumer sentiment unexpectedly jumped 2.6% to 74.2 and hit a six-month high, while U.S. gross domestic product advanced 2.5% in the third quarter.

Nearing a Layoff of 1,700 Workers

To compensate for rising costs, FedEx said in late September that it would boost January 2011 shipping rates for domestic and export services by an average of 3.9%. FedEx's planned 5.9% average rate hike will be cut by 2 percentage points when factoring in an adjustment to the minimum threshold for fuel surcharges, the company said in a Sept. 29 statement.

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FedEx said in September that earnings for the quarter ended Aug. 31 more than doubled from a year earlier to $380 million. An 18% increase in revenue, lower depreciation expenses and other costs that remained relatively stable more than offset the effect of higher fuel costs. Those costs jumped 33% to $887 million and accounted for 9.4% of sales, up from 8.3% a year earlier. The company also said it would lay off 1,700 workers after combining its FedEx Freight and FedEx National LTL operations in late January.

Competitor United Parcel Service (UPS) is expected to boost current-quarter earnings by about 40%, while a Thomson Reuters analysts poll forecast revenue to rise about 9%.

FedEx made news a day ahead of its earnings release when a U.S. District Court judge ruled that FedEx Ground truck drivers generally aren't considered FedEx employees. Judge Robert Miller Jr. found that most of those drivers are instead contractors, meaning they're responsible for their own expenses and benefits.

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