Earnings Preview: FedEx
NEW YORK (AP) — Investors who already have an idea of how FedEx Corp. performed in its fiscal first quarter will listen closely to what the world's No. 2 package delivery company says about demand in the critical holiday shipping season when it reports financial results and expectations before the market opens Tuesday.
WHAT TO WATCH FOR: Effects of the sluggish economy. When FedEx last reported earnings in June, it warned that slow global economic growth would crimp its earnings over the next year. A month later larger rival United Parcel Service Inc. cut its earnings growth forecast, saying it was more pessimistic about U.S. growth than many economists.
There haven't been many encouraging economic signs since then. China's economy has slowed, and job growth in the U.S., the world's largest economy, hasn't been enough to lower the unemployment rate much here. The Federal Reserve's open-ended stimulus announced last week underscored that the current recovery has been the weakest since World War II.
Despite a sputtering global economy, there may be some good news for FedEx. The launch of Apple Inc.'s iPhone 5 may be enough to support its earnings through the end of the year. Sales of the iPhone and other major technology launches tend to provide a big boost to shippers. JPMorgan thinks the iPhone launch could be so successful that it could raise U.S. gross domestic product by half a percentage point.
WHY IT MATTERS: FedEx results provide insight into the global economy because of the number of products it ships and the number of countries in which it does business. Its forecasts are closely watched for signals of future economic health.
WHAT'S EXPECTED: More bad news. FedEx cut its forecast for the recent quarter earlier this month. FedEx also might provide details on the planned restructuring of its Express unit, which is suffering the most from the slow economy. FedEx expects to earn between $1.37 and $1.43 per share in the quarter, down from a previous forecast of $1.45 to $1.60 per share.
LAST YEAR'S QUARTER: FedEx earned $464 million, or $1.46 per share, on revenue of $10.52 billion.