FedEx To Ship Bad Results?
Joshua Lipton, 06.18.07, 1:15 PM ET
Don't expect FedEx to mail in impressive quarterly results.
The company is expected to release fourth-quarter financial results on June 20th. Ahead of that announcement, Edward Wolfe, analyst at Bear Stearns, reduced his estimates.
Wolfe wrote to clients that the fourth-quarter performance of FedEx will likely come in below expectations. The analyst reduced his earnings-per-share estimate for the quarter from $1.98 to $1.85.
Why the pessimism? Wolfe said his sense is that both the domestic and international package business has slowed materially during the first half of 2007, following a slowdown in truck load, less-than truck load, and rail volumes in 2006.
Further, Wolfe wrote, the company's economist has reduced his 2007 GDP forecast from 2.6% to 2.1% since April. The analyst also expects fuel to work against FedEx by about 13 cents per-share in the quarter.
Wolfe told clients that he has reduced his fourth-quarter 2007 and 2008 EPS estimates by 7% and 5% to $1.85 and $7, respectively, from $1.98 and $7.40. He said that FedEx has underperformed both the transport sector and the S&P 500 year-to-date as earnings estimates continue to come down.
Also, Wolfe said, firm management has announced that capital expenditures will need to go up for several years as re-investment increases Europe, China, and India as well FedEx's domestic plane fleet.
He rates the company "peer perform."
In morning trading Monday, shares of FedEx decreased 1.3%, or $1.46, to $109.91.
Back in March, FedEx lowered its earnings forecast for the fiscal fourth-quarter to a range of $1.93 to $2.08 per share, from a previous range of $1.98 to $2.13 per share. Analysts had estimated $2.04 per share.
Slower economic growth and additional investments in the business are expected to adversely affect the company’s earning through fiscal 2008, but the company had said it remained hopeful it will maintain its long-term growth rate. (See: "FedEx Delivers Disappointment.")