FedEx Reports Strong Fourth Quarter, Weak Guidance For Next Year, Shares Pop Then Sell Off

Global shipping giant FedEx FDX Wednesday before the bell reported fourth quarter and full year earnings that beat expectations. However, guidance for the next year was weaker than expected, muting pre-market gains for the stock.

Fourth Quarter

For the fourth quarter of fiscal 2013 ended May 31, FedEx reported earnings per share of $2.13, beating the consensus analyst estimate of $1.97 by a strong 8.12 percent. Earnings per share grew over 7 percent from the same period a year ago when the company reported earnings per share of $1.99.

Revenue did miss expectations slightly in the quarter, as FedEx reported revenue of $11.4 billion. Wall Street analysts had expected FedEx to report revenue of $11.44 billion although revenue did rise 3.64 percent from the fourth quarter of 2012.

Full Year Results

For the full fiscal year 2013 also ended May 31, FedEx earned $6.23 per share, better than the forecast of $6.04 per share. Earnings per share beat forecasts by 3.15 percent although earnings declined 5.5 percent from the previous year. Earnings in both the fiscal year and fourth quarter were negatively affected by a $0.20 per share charge related to the retirement of aircraft.

Revenue for the full year was also slightly weaker than expected at $44.3 billion vs. the consensus forecast of $44.39 billion. Revenue did grow from 2012 though when FedEx reported revenue of $42.7 billion.

“FedEx Ground posted another strong year and FedEx Freight margins continued to improve,” said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. “These positive developments did not fully offset tepid economic growth and customer preference for less costly international shipping services. FedEx Express results improved in the fourth quarter, and while near-term challenges remain, we are confident we are positioning FedEx for profitable, long-term growth.”

Guidance

FedEx announced that it is changing how it reports guidance and will now provide only full-year guidance which it will update on a quarterly basis. FedEx now expects 7-13 percent earnings per share growth in 2014 over 2013, meaning it expects earnings per share to rise to between $6.67 and $7.04 per share vs. the consensus estimate of $7.36 EPS. The weak guidance weighed on gains pre-market.

FedEx also provided some guidance on the market and economy as a whole. FedEx noted its guidance assumes U.S. GDP growth of 2.3% and world GDP growth of 2.7%. Capital spending for fiscal 2014 is expected to be approximately $4 billion.

“We remain focused on improving margins and returns in all of our businesses. The pace of that improvement is expected to be moderate in fiscal 2014 and then accelerate in fiscal 2015,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “Our profit improvement program is progressing, but we continue to see the effects of customers selecting lower-rate international services. FedEx Express will further decrease capacity between Asia and the United States in July.”

Shares React

Shares initially spiked as high as $103.89 per share pre-market from Tuesday's close of $99.48 but then sold off to as low as $99.00 for a decline of 0.45 percent.