Earnings Preview: FedEx

A jolly holiday for FedEx is likely not enough to offset the slow global economy

Associated Press

NEW YORK (AP) -- A strong holiday season for FedEx Corp. might not be enough to offset stubbornly slow growth in the economy, and analysts expect the company will report lower fiscal second-quarter results before the market opens Wednesday.

WHAT TO WATCH FOR: FedEx's reading of holiday shipping volume and signs of caution in their economic forecast.

The world's second-largest package-delivery company expects to handle 280 million shipments between Thanksgiving and Christmas, up 13 percent from the same stretch last year.

The number of shipments FedEx handles at the holidays has climbed steadily along with the growing number of online purchases. The volume of packages it handles on its busiest day, which varies according to Christmas shipping deadlines, has nearly doubled since 2005.

But the busy weeks ahead of Christmas will likely be offset by lackluster growth in the broader economy. FedEx is continuing to see consumers and businesses opt for slower ways of shipping to save money, which is hurting its core air-delivery network. In its last quarterly earnings report, FedEx warned that the economy is stalling and it expects conditions to get worse next year. It's making big cuts in its businesses that have been hardest hit and offering buyouts to thousands of employees.

Earlier this month it said it will offer some employees up to two years' pay to leave, starting next year. The voluntary program is part of an effort to cut annual costs by $1.7 billion within three years.

But those cost savings won't have an effect for a while, and some analysts urge caution. A Raymond James analyst cut his rating on FedEx Corp. to "Outperform" from "Strong Buy" citing many economic factors that are likely to hold down the stock in coming months, including the so-called "fiscal cliff" of government spending cuts and tax increases that will go into effect on Jan. 1 without action from Congress and the White House.

WHAT'S EXPECTED: Analysts forecast earnings of $1.41 per share on revenue of $10.84 billion, according to FactSet.

LAST YEAR'S QUARTER: The Memphis, Tenn., company earned $497 million, or $1.57 per share, on revenue of $10.59 billion.

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