FedEx Corp. (FDX, Financial) released its second quarter financial results on Dec. 18 after the market closed. While earnings fell below analysts’ estimation, revenue surpassed expectations. The package delivery giant is doing well in the home circuit, but its international business suffered, especially in Europe. Alan Graf, FedEx’s chief financial officer, commented:
“Global trade has slowed in recent months, and leading indicators point to ongoing deceleration in global trade near-term ... These trends, coupled with the change in service mix at FedEx Express, are negatively impacting the segment’s financial results. We remain committed to actively managing costs with a heightened focus on increasing efficiency across the organization.”
Key metrics
The Memphis, Tennessee-based company said that it made a second-quarter profit of $935 million or $3.51 per share, up from $775 million or $2.84 per share reported in the year-ago quarter. Revenue during the same period inched up 9.2% to $17.8 billion, as operating income climbed 4.4% to $1.17 billion.
Cost-cutting measures
Due to unsatisfactory international operations and mediocre earnings, FedEx has taken some cost-cutting measures. U.S. employees have faced voluntary buyout programs that are expected to save the company around $225 million to $275 million. However, the courier giant would also have to incur a charge of around $450 million $575 million related to the buyouts.
The company is adopting other cost-cutting measures, such as limiting staff hiring, reducing variable compensation and other incentive pay, reducing worldwide network capacity and lowerimg discretionary spending.
Outlook
For the full year, the company expects to deliver a record number of packages both due to the holiday season and the fact that online shopping is growing. The company projects full-year earnings to be between $15.50 and $16.60 per share, which was lower than its previous guidance of $17.20 to $17.80 a share. The company cited economic troubles in Europe as the main reason for providing the bleak outlook.
Disclosure: I do not hold any position in the stock mentioned.
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