Peak Shipping Season Hits FedEx’ Memphis Hub

Posted: December 22, 2009 in Nitegator
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FedEx said on Thursday that its second-quarter profit fell 30 percent on a 10 percent decline in revenue and issued a disappointing forecast for the current period, setting off a 6 percent decline in its share price. The company predicted earnings of 50 to 70 cents a share in the current quarter, well under analysts’ expectations of 84 cents a share. In the quarter, FedEx earned $345 million, or $1.10 a share, compared with $493 million, or $1.58 a share, in the period a year earlier. Sales in the period, which ended Nov. 30 and was the second quarter of FedEx’s fiscal year, fell to $8.6 billion, from $9.54 billion. Shares of FedEx, which is based in Memphis, fell $5.48, to $84.47.

The chief executive, chairman and president, Frederick W. Smith, said in a conference call he believed that the nation’s economy “reached a turning point” in recent months. FedEx is adding more flight hours to meet international demand in the current quarter, which will increase its costs. The company cut flight hours by 6 percent during the last quarter as it used fewer and more fuel-efficient airplanes. But as package volume started picking up in the quarter, especially in Asia and Latin America, FedEx scheduled more flights.

Average daily package volumes at FedEx Ground were up 4 percent, according to company officials, with FedEx SmartPost, its “last mile” delivery service partnership with the United States Postal Service up 63 percent year-over-year at 1,265 packages shipped per day. And total U.S. domestic daily package volumes were up 4 percent at roughly 2,618 pounds per day, but revenue per package at $14.51 dipped 19 percent from $17.86, which was primarily due to declining fuel surcharges, rate per pound, and weight per package. FedEx International Priority average daily package volume was up 6 percent at about 529 pounds per day, but revnue per package at $52.88 was down 14 percent, due to lower fuel surcharges. Data from its peak Christmas shipping day, Dec. 14, show that FedEx shipped 14.1 million packages in one day. That’s up from 12 million shipped on last year’s busiest day. That data comes from FedEx’s major domo, Smith believes the overall U.S. economy passed a “turning point” in the most recent quarter about the time of the one-year anniversary of the Lehman Brothers collapse.

FedEx is restoring merit-based pay increases at the shipping giant and also is restoring the 50 percent match to its employees’ 401(k) contributions. FedEx stock fell on the day of the announcement by 5 percent, dragging the entire market with it, FedEx stock is still up 34 percent for the year and has outgained rival UPS by double-digits over the past 52 weeks. The company on Monday shipped 14.1 million packages, considered the peak day for mailing holiday goods. The figure was a million higher than expected and up 17% from the busiest day last year. December volume growth indicates that “global economic conditions are improving,” Smith said in a conference call Thursday after the company reported a 30% drop in profit. Chief Financial Officer Alan B. Graf Jr. said the company is starting to emerge from “the worst economic downturn in FedEx history.”

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  3. […] Peak Shipping Season Hits FedEx' Memphis Hub В« Nitegator Peak Shipping Season Hits FedEx' Memphis Hub. Posted: December 22, 2009 by nitegator in Nitegator … […]

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