Federal Express (NYSE:FDX) has lowered its annual earnings outlook after announcing a quarterly profit below analysts’ expectations.
FedEx said it is struggling with higher costs as package growth stalls. As a result, FedEx slashed its full-year outlook for adjusted per-share earnings to a range of $19.75 U.S. to $21.00 U.S. The company’s previous range, provided in July, was $20.50 U.S. to $21.50 U.S.
FedEx stock fell 4.1% in New York trading after hours on the news. The company’s shares have declined 3.4% this year through Monday while the Standard & Poor’s 500 Index has risen 16%.
The company also said that its adjusted earnings in its most recent quarter were $4.37 U.S. a share, down from $4.87 a year earlier. Analysts had expected EPS of $4.92 U.S. Unadjusted operating margin was 6.4%, down from 8.2% a year earlier.
FedEx’s quarterly revenue totaled $22 billion U.S., slightly above the $21.9 billion U.S. that analysts had estimated. During the quarter, revenue per package rose 15% for the Express unit and climbed 10% for the Ground unit. FedEx’s Freight unit saw both volume and yield increase, helping the unit increase operating margins to 17.3% from 15% a year earlier.
However, the company said costs suffered because of a tight labor market, as a dearth of workers drove up wages, reduced network efficiencies and increased the need to hire outside transportation services. This led to a $450 million U.S. increase in costs from a year earlier.
Average daily package volume unexpectedly fell slightly from a year earlier at both the Express and Ground units as "continued supply-chain disruptions have slowed U.S. domestic parcel demand compared to the company’s earlier forecast."
