FedEx Profit Drops, but Revenue Rises

FedEx(FDX Quote) said its first-quarter net income fell 22% as the economy slowed and fuel prices remained high, and the package carrier forecast continued economic weakness ahead.

The company earned $384 million, or $1.23 a share, in the quarter ended Aug. 31. Analysts surveyed by Thomson Reuters had estimated $1.21 a share. Revenue rose 8% to $9.97 billion, marginally higher than estimates.

In the same quarter a year earlier, FedEx earned $494 million, or $1.58 a share.

While revenue rose due to fuel surcharges and higher volumes, the reduction in profits reflected "the continued weak U.S. economy, affected by ongoing high fuel prices, a significant contraction in consumer spending and a very tough pricing environment," CFO Alan Graf said Thursday on an earnings conference call. "We expect no improvement in the U.S. economy in the near term and a continued slowdown in the global economy."

Total combined average daily package volume in the FedEx Express and FedEx Ground segments grew 1% during the quarter. Operating income declined 23% to $630 million due to global economic weakness, steep fuel expenses and the related negative effects of higher fuel surcharges. Additionally, the quarter contained one fewer operating day than the same quarter a year earlier.

Despite the fact that energy prices decreased during the quarter, the average price of jet fuel was 77% higher than it was a year earlier, the company said.

Looking ahead, FedEx said it expects second-quarter earnings of $1.40 to $1.60 a share and full-year earnings of $4.75 to $5.25 a share. Analysts are calling for $1.35 in the second quarter and $5.18 for the year.