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The cost of funding an early retirement program drove down earnings at


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in the first quarter compared with last year, but the company managed to beat analysts' estimates on an operating basis.

The Memphis-based courier earned $128 million, or 42 cents a share, on revenue of $5.69 billion in the latest quarter, compared with earnings of $158 million, or 52 cents a share, on revenue of $5.45 billion a year ago. The latest quarter included a pretax charge of $132 million, or 27 cents a share after tax, related to the early retirement program, and a gain from a tax ruling of 8 cents a share.

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FedEx's cost side was also swollen by a 10% rise in its quarterly fuel expense to $322 million.

Excluding the items, FedEx earned 61 cents a share. Analysts polled by Thomson First Call were predicting earnings of 57 cents a share on that basis and revenue of $5.79 billion. FedEx's share were recently down 62 cents, or 1%, to $65.46.

The company forecast second-quarter earnings of 80 cents to 90 cents a share, and full-year earnings before items of $3 to $3.15 a share. The First Call consensus estimates are 90 cents and $3.25 a share, respectively. With restructuring costs, the company expects to post GAAP earnings of 53 cents to 57 cents a share in the second quarter and $2.75 to $2.96 a share for the year.

FedEx expects the cost of the ongoing headcount reductions to come in at the high end of a $230 million to $290 million range in the year ending next May and result in savings at the high end of $100 million to $130 million, leaving a net cost to the company of $130 million to $160 million. In fiscal 2005 and beyond, the estimated annual savings from these programs remains $150 million to $190 million, FedEx said.

The company has also changed the way it will break down future financial reports and will now report in three segments: FedEx Express, FedEx Ground and FedEx Freight. In the first quarter, the FedEx Express, the area subject to the restructuring, produced 73% of the revenue.