FedEx Trims 2016 EPS Outlook As Q1 Results Miss Estimates

(RTTNews) - Package delivery giant FedEx Corp. (FDX) reported Wednesday that profit for the first quarter grew six percent from last year, reflecting improved operating margins and revenue growth.

The results benefited from one additional operating day at each of the company's transportation segments and the continued positive impacts from the company's profit improvement program.

Both earnings per share and quarterly revenues missed analysts' expectations. The company also trimmed its initial earnings guidance for the full-year 2016.

The performance of package shipping bellwethers like FedEx and its rival United Parcel Service, Inc. (UPS) are generally considered a strong barometer of overall consumer attitude and business confidence due to the large number of shipments they handle for consumers worldwide.

"FedEx Corp. is performing solidly given weaker-than-expected economic conditions, especially in manufacturing and global trade," Frederick Smith, chairman, president and CEO said.

The Memphis, Tennessee-based FedEx, a Dow component, reported net income of $692 million or $2.42 per share for the first quarter, higher than $653 million or $2.26 per share in the prior-year quarter, which included the negative impact of $0.14 per share related to changes in segment reporting.

On average, 24 analysts polled by Thomson Reuters expected the company to report earnings of $2.46 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenue for the quarter increased 5 percent to $12.28 billion from $11.68 billion in the same quarter last year, but missed nineteen Wall Street analysts' consensus estimate of $12.30 billion by a whisker.

Revenues for FedEx express declined 4 percent to $6.59 billion, while FedEx ground revenues increased 29 percent to $3.83 billion from last year. Revenues for FedEx freight edged down 0.5 percent to $1.60 billion, while FedEx services revenues grew 4 percent to $390 million from last year.

Operating margins for the quarter improved 20 basis points to 9.3 percent from last year's 9.1 percent.

FedEx also said Tuesday that its subsidiaries, FedEx Express, FedEx Ground and FedEx Freight, will increase shipping rates by an average of 4.9 percent, effective January 4, 2016.

FedEx is also increasing surcharges for FedEx Ground shipments that exceed the published maximum weight or dimensional limits, and updating certain fuel surcharge tables at FedEx Express and FedEx Ground, effective November 2, 2015.

Looking ahead to fiscal 2016, the company trimmed its adjusted earnings guidance to a range of $10.40 to $10.90 per share from the prior forecast range of $10.60 to $11.10 per share. Analysts are currently looking for full-year 2016 earnings of $10.82 per share. The capital spending forecast for that year continues to be $4.6 billion.

"Our new fiscal 2016 outlook is modestly lower than our initial forecast due primarily to weaker LTL industry demand and higher than expected self-insurance reserves and operating costs at FedEx Ground. We still expect strong earnings growth this year, as we remain focused on executing our profit improvement program, leveraging e-commerce growth and enhancing our revenue quality," CFO Alan Graf, Jr. stated.

FDX closed Tuesday's regular trading session at $154.00, up $3.05 on a volume of 3.23 million shares. In the past 52-week period, the stock has been trading in a range of $130.13 to $185.19.