Bloomberg News

FedEx Profit Beats Estimates, Orders 27 Jets to Renew Fleet

December 17, 2011

(Updates with analyst’s comment in fourth paragraph.)

Dec. 15 (Bloomberg) -- FedEx Corp. posted a quarterly profit that beat analysts’ estimates and ordered 27 Boeing Co. 767 jet freighters to retire some of the oldest planes at the world’s largest cargo airline.

FedEx rose in early New York trading after the 76 percent increase in earnings for the three months through November. Gains were fueled by “effective yield management” and strong consumer demand in the home delivery and SmartPost programs, Chief Executive Officer Fred Smith said in a statement.

Profit for the three months through November rose to $497 million, or $1.57 a share, from $283 million, or 89 cents, a year earlier, the Memphis, Tennessee-based company said in a statement. That topped the $1.53 average estimate of 22 analysts in a Bloomberg survey.

“The domestic economy is in better shape than most forecasters” say because of consumer spending, said David Campbell, an analyst with Thompson Davis & Co. in Richmond, Virginia. Campbell said FedEx’s earnings estimate for this quarter is “slightly higher” than he had predicted and that “reflects the retail spending during Christmas season.”

Sales climbed 10 percent to $10.6 billion, in line with estimates. FedEx and rival United Parcel Service Inc. are considered economic barometers because they deliver goods ranging from pharmaceuticals to financial documents.

Quarterly Forecast

FedEx advanced 4.1 percent to $80.50 at 9:03 a.m., before the start of regular trading in New York.

Adjusted earnings for the quarter ending Feb. 29 will be $1.25 to $1.45 a share, the company said. That’s in line with the $1.31 average estimate from 21 analysts in a Bloomberg survey.

The Boeing 767s that FedEx ordered will be about 30 percent more fuel-efficient than the MD10 jets they’re replacing, some of which are more than 40 years old, the company said. Three of the jets will be delivered in fiscal 2014 and six a year from 2015 through 2018. The jet order is valued at $4.7 billion at catalog prices, though carriers typically negotiate discounts.

Delaying delivery of 11 larger Boeing 777 aircraft already on order will help balance capacity with lower demand from FedEx Express customers using up inventory, the company said. Two of those jets will be deferred from fiscal 2013, five from 2014 and one a year from 2015 through 2018.

Boeing 777 Postponement

Shifting the timetable is a continuation of efforts during the quarter to adjust the company’s network, particularly in Asia, “as recent destocking trends have impacted demand for our FedEx Express services,” said Chief Financial Officer Alan Graf.

Campbell said delaying the 777 orders doesn’t necessarily indicate that FedEx expects slow economic growth since the company can use the 767 overseas.

“They won’t need as many 777s as fast as they were planning on getting them” as they use the 767, he said by telephone. “And as far as 777s, we’re only talking about changing the capacity slightly in the fiscal 2013 year, and then some more in fiscal 2014, so it doesn’t say anything about the outlook for growth in fiscal 2012.”

--Editor: James Langford

To contact the reporter on this story: Natalie Doss in New York at ndoss@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net.


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