FedEx posts higher-than expected profit, will cut more capacity
By Nivedita Bhattacharjee
(Reuters) - FedEx Corp (FDX.N: Quote) reported a higher-than-expected quarterly profit on Wednesday, sending its shares higher, but the world's biggest air-freight company said it was cutting more capacity between the United States and Asia.
The company, considered an economic bellwether because of the massive volume of goods it moves around the world, is still trying to adjust to increasing demand for cheaper ground transport rather than pricier but faster air shipping.
In particular, the express unit, FedEx's biggest source of revenue, has suffered as more cost-conscious international customers opt to use container ships instead of costly overnight shipment by air. International priority shipment volumes fell 2 percent during the quarter, while international export revenue per package fell 2 percent as rates dropped.
The company said earlier this month that it would permanently retire or will speed up the retirement of 86 aircraft and more than 300 engines as it modernizes its fleet. It is also increasing rates for its FedEx Freight subsidiary by an average of 4.5 percent, effective July 1.
"Our profit improvement program is progressing, but we continue to see the effects of customers selecting lower-rate international services," Chief Financial Officer Alan B. Graf Jr. said. "FedEx Express will further decrease capacity between Asia and the United States in July."
FedEx reported net income of $303 million, or 95 cents a share, for the fourth quarter ended May 31, compared with $550 million, or $1.73 a share, a year earlier. (Graphic: link.reuters.com/cyh98t)
Excluding costs of a business realignment program and aircraft impairment charges, the company earned $2.13 a share. Analysts on average were expecting $1.96, according to Thomson Reuters I/B/E/S.
Shares of Memphis, Tennessee-based FedEx were up 3 percent at $102. 48 in morning trading. Continued...