FedEx reports earnings

FedEx reported earnings that topped the consensus estimate, but delivered downside guidance due to the recent run-up in fuel prices. FedEx did not provide a full-year outlook for fiscal 2010 citing a lack of visibility into the economic recovery and jet-fuel costs.

Revenues fell 20% year-over-year to $7.85 billion, short of the $8.32 billion consensus, hurt by lower volumes due to the global recession as well as reduced fuel surcharges and lower shipment weight.

On the bright side, some numbers suggest that the decline has leveled off. International priority deliveries, one of FedEx’s most profitable offerings, slid 12%, less than the 13% drop in the previous quarter. U.S. express package volumes fell 2%, the smallest in five quarters.

Another positive note is the aggressive cost-cutting measures, such as idling planes and cutting back its work force, which resulted in higher cost savings than many anticipated.

The results also included $1.2 billion in write-downs, most of which was attributed to its 2004 acquisition of Kinko’s Inc. FedEx has taken write-downs totaling about 70% of Kinko’s purchase price.
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Peter J. Lazaroff