FedEx Corp. (NYSE: FDX) reported earnings this morning that beat analysts’ expectations, but quarterly sales and profits are not the focal point for investors. FedEx reported EPS of $1.33, a penny better than earnings estimates on sales revenue of $9.43 billion, substantially better than FDX sales� estimates for of $9.04 billion. FedEx Corp. leaders noted that volume growth drove the better-than-expected results for the shipping stock.
For the full fiscal year, FedEx reported sales revenue of $34.7 billion, above estimates of $34.29 billion and EPS of $3.76, again a penny better than FedEx earnings estimates. EPS was flat with last year (excluding items for 2009), while revenues were down 2%. Rival United Parcel Service, Inc. (NYSE: UPS) reports fourth quarter and full year earnings next month, and is expected to surpass EPS both sequentially and year-over-year.
The freight haulers have benefited from the global economic recovery which has led to an increase in global trade. Recent troubles in Europe will have a more substantial impact on both FedEx and UPS going forward, and that’s the issue investors will focus on.
In its press release, FedEx projected first quarter 2011 EPS of $0.85-$1.05, and full-year EPS of $4.40-$5.00. Analysts were predicting quarterly EPS of $1.04 and annual EPS of $5.06. FedEx based its projections on stable fuel prices and “continued moderate recovery in the global economy.”
The company cited “significant increases” in pension contributions, aircraft maintenance, and higher health care costs as constraints on earnings growth in 2011. All in all, the company’s projections look shaky.
FedEx is right to be cautious in its projections. The Baltic Dry Index, a measure of shipping activity for large ocean-going carriers, has fallen steadily from a high of 4,187 on May 25th to 3,020 yesterday. FedEx’s lukewarm outlook could well turn out to be optimistic if the global economic recovery continues to stumble over concerns about Europe and real estate bubbles in China.
FedEx shares are trading down about 2% in the pre-market this morning.
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