FedEx reported a quarterly profit that missed Wall Street expectations, a signal that customers worldwide continue to shift to cheaper transportation.
The package-delivery company says it will increase its cost-cutting program as a result and, starting next month, reduce its express business in Asia. FedEx hopes the slow-down will allow it to retire more aircraft.
Net income was $391.1 million, $1.23 a share, down from $427.5 million, $1.55 a share, a year earlier. Excluding one-time items, FedEx earned $1.13 a share. Analysts predicted $1.38 a share in earnings.
FedEx CEO Fred Smith blamed the disappointing quarter on continued weakness in the air freight business. Revenue in that unit was virtually flat at $1.2 billion. FedEx, a Dow component, competes chiefly with UPS and Deutsche Post-owned DHL, but its general financial health is often monitored by conditions in rail companies like Union Pacific and CSX Corp.
FedEx, the second largest package-delivery company, often serves as a measure of world economic conditions because its business stretches across 220 countries and moves more than 9 million packages daily. That FedEx will tamp down its Asian business reflects the slow-down in growth that the region faces.
FedEx, indeed, voiced a gloomy opinion about conditions worldwide, saying it expects the lackluster international business to continue.Revenue increased 3.7% to roughly $11 billion.
I always watch this stock closely because its usually one of those bellwether for the global economy.
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This post was edited on 3/20 at 3:00 pm