The company said it sees continued weakness in international air freight markets and offered guidance that is below estimates for the fiscal fourth quarter and full year. In premarket trading, FedEx shares were down $3.66 to $102.80.
Excluding items, the overnight package shipper said it earned $1.23 a share in the fiscal third quarter ended Feb. 28. Analysts surveyed by Thomson Reuters had estimated $1.39. Revenue rose 4% to $11 billion. Analysts had estimated $10.9 billion. In the same period a year earlier, excluding items, FedEx earned $1.55 a share.
Including costs of $47 million related to a voluntary buyout program, FedEx earned $361 million, or $1.13 a share, compared with $1.65 in the same period a year earlier. Operating income fell 28% to $589 million and operating margin fell to 5.4% from 7.7%."The third quarter was very challenging due to continued weakness in international air freight markets, pressure on yields due to industry overcapacity and customers selecting less expensive and slower-transit services," CEO Fred Smith, in a prepared statement. "In response, beginning April 1, FedEx Express will decrease capacity to and from Asia and will aggressively manage traffic flows to place low yielding traffic in lower-cost networks." Smith said the company is "assessing how these actions may allow FedEx Express to retire more of its older, less-efficient aircraft." Results were also negatively impacted by buyout costs and by fewer operating days during the quarter, FedEx said. Looking ahead, FedEx projects earnings of $1.90 to $2.10 a share in the fiscal fourth quarter and $6 to $6.20 a share for the full fiscal year. Both figures are below analysts' estimates of $2.07 for the quarter and $6.31 for the full year. The guidance excludes an estimated cost of $450 million to $550 million, or 89 cents to $1.09 a share, for voluntary employee buyout programs, with some additional costs expected in fiscal 2014. FedEx cut its capital spending forecast for fiscal 2013 to $3.6 billion from its previous forecast of $3.9 billion. "Our lower-than-expected results for the quarter and reduced full-year earnings outlook were driven by third quarter international revenues declining approximately $100 million versus our guidance primarily due to accelerating customer preference for lower-yielding international services, lower rate per pound and weight per shipment," said Chief Financial Officer Alan Graf, in a prepared statement. "We expect these international revenue trends to continue," Graf said. "We have other actions under way beyond those already included in our profit improvement program. Some of these additional actions may involve temporarily or permanently grounding aircraft, which could result in asset impairment or other charges in future periods." Follow @tedreednc -- Written by Ted Reed in Charlotte, N.C. >To contact the writer of this article, click here: Ted Reed
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