Fedex shares drop as firm cautions over weaker outlook

Published:  26 Mar at 4 PM

As reported by the BBC, Fedex shares dropped 4% after the firm said its financial recovery is not as positive as it had initially hoped. The delivery company giant said that rising fuel costs were prompting customers to send goods via land rather airfreight.

However, the company showed a strong performance during the third quarter, revealing a net income which more than doubled to $521 million with sales rising over 9%. The firm said the current quarter looked strong as well.

Alan Graf, chief financial officer, said the fourth quarter was still “very good”. However, the firm is not seeing as strong an economic climate as it had hoped it would one year ago, he said. The financial environment and the price elasticity on the company’s premium services are due to rising fuel costs which are dampening momentum, he added.

Despite the firm’s slightly gloomy outlook, many analysts say Fedex is still well-positioned. Art Hatfield, managing director of equity research at Morgan Keegan, called 2012 “a very good year” for Fedex.

There is a lot of potential for this firm, said Mr Keegan. It is a company which is probably very close to prior peak financial earnings, but it is nowhere close to operating at peak levels in terms of margins and other things, he added.