LastTraintoMEM

NEW YORK (Reuters) - FedEx Corp forecast third-quarter profit below analysts' expectations, sending the package delivery giant's shares down 3.6 percent in premarket trading.
FedEx, considered an economic bellwether because of the scope of its business, also reported second-quarter results in line with its pre-announcement earlier this month.
It forecast third-quarter earnings of 50 cents to 70 cents a share, well below analysts' average estimate of 84 cents, according to Thomson Reuters I/B/E/S.
The company forecast profit for the full fiscal year of $3.45 to $3.75 per share, compared with analysts' forecast of $3.46.
For the second quarter, ended Nov 30, FedEx posted a profit of $345 million, or $1.10 per share, down 30 percent from $493 million, or $1.58 per share, a year earlier. The company pre-announced the results on December 7. Before that, it had forecast 65 cents to 95 cents per share.
FedEx said positive economic momentum drove volume growth across all its segments in the second quarter.
Its shares were down 3.6 percent to $86.72 in premarket trading.
(Reporting by Helen Chernikoff; editing by John Wallace)

Timeoff2fish

Highlights From FDX's Q2 Conference Call: Volume Rose Across The Board, Sees Continued Improvement in World Economy


December 17, 2009 10:35 AM EST
FedEx (NYSE: FDX) reports Q2 EPS of $1.10, 5 cents better than the analyst estimate of $1.05. Revenue for the quarter was $8.6 billion, which compares to the estimate of $8.46 billion. Shares are down 5.21% today.

Highlights From FDX's Q2 Conference Call:


(CEO) At FedEx Express, International Priority volume rose 6% in Q2 due largely to volume growth in Asia and Latin America.
U.S. domestic package volume at FedEx Express increased 4%, and average daily volume also increased at FedEx Ground and FedEx Freight.
We believe these quarterly trends and volume growth indicate global economic conditions are improving.
With continued improvement in the world economy, we expect stronger demand for our services in the second half of FY '10 and stronger year-over-year comparisons.
For the remainder of FY '10, we will continue to balance cost controls with investment opportunities that serve our long-term interest, such as the more fuel-efficient and productive Boeing 757 and the 777 aircraft joining our fleet. By the end of FY '10, we will have added a total of 17 757s and four 777s.
FedEx Trade Networks, part of the Express segment, is a growing international ocean and air freight forwarder. And it has opened new offices across Asia, Europe and Latin America as part of its aggressive expansion plan, bringing to 18 the number of new locations in 2009 to complement its operations in the U.S. and Canada.
In November, FedEx Express widened its international portfolio, adding India to the list of countries including China, Canada, U.K. and Mexico where it offers branded domestic service. In China, FedEx Express accelerated inbound international express shipments to Shanghai by six hours.
(CFO) International Priority package volume increased 6% versus last year, led by the Asia and Latin America regions. And International Priority freight pounds increased by 16%.
Operating income declined 27% as last year's results significantly benefited from falling fuel prices and the related fuel surcharge timing lag.
Cost control efforts included fewer flight hours and improved route efficiencies, which led to a 5% reduction in jet fuel consumption despite a 4% increase in Express package volumes.
At Express, operating income declined 36%. At Ground, volume increases and strong productivity drove segment operating income up 12% to $238 million.
Ground volume increased 4%, and FedEx SmartPost volumes increased 63%. FedEx Ground yields decreased only 2% as improvements in base rates and higher extra services revenue helped mitigate the impact of lower fuel surcharges.
(Q&A) I wanted to ask you a little bit about your guidance. The volume trend appears very constructive, and it sounds like you are generally expecting that to continue. It looks like the third quarter is perhaps a little more conservative than the full year. And I'm wondering if there are any cost items in the third quarter that are somewhat unusual versus what you would expect looking at the fourth quarter, or versus what you would've had in the second quarter.(A)Well, a couple of items. First seasonally, the third quarter is always our weakest, particularly post holidays. We're having a strong December I will say. As Fred mentioned, on our largest package day of 14.1 million packages. But we expect a little bit of a slowdown in the January and February timeframe. And then secondarily as I alluded to, we really didn't have time to add much cost for the anticipated traffic that we saw at Express. And we want to keep our service levels as high as humanly
possible and to catch up with that volume and keep service levels high; we're going to have to invest in additional hours. And also the cycles that we put on those aircraft will have to have some additional maintenance. So, there is a little bit of drag there, as well as we'll be continuing to accrue for our annual incentive compensation plans in the second half. We had no accruals in the first quarter and we had some catch-up accruals in the second quarter. So other than that I still believe that outlook, as Fred mentioned and I mentioned, for our traffic is very positive; and we should have a lot of momentum going into the fourth quarter and fiscal '11.
And in terms of the variable compensation, can you give us a sense of the magnitude of what that is in second -- what it was in second quarter and if that's kind of similar, if you look at that across the next two quarters? Or if it's a lot different, given that you had some -- I think you said some additional true-up in second quarter related maybe to what you didn't accrue in the first quarter. (A)Well, I wouldn't say it's not material to the overall earnings of the company, but it is a little bit of a drag. Just as we use it as a shock
absorber coming down to help cushion our earnings decline in very tough times, now we are reinvesting back in our folks who worked so hard. So, it will be - it will have a dampening effect, but it won't be material. But it will have a dampening effect.
Normally through this process of a shifting economy, it sounds like we're seeing a bit of Express run-up in anticipation of maybe a little bit of a fear of retailers to stock some inventory. When do you expect part of that migration to move back? Or are you seeing that migration begin yet to establishing normal inventory levels through the Ground shipments? Are you seeing that develop yet?(A)Yeah, this is Mike Glenn. It's very difficult to make that call at this point, that's why in Alan's earlier remarks, he mentioned that it was going to be important for us to see the trends after the holiday season. We have been pleased with the volume trends as we progressed through the quarter, and leading up to the month of December, which led to our record day of 4.1 million packages but we - excuse me, 14.1 million packages. But we certainly want to keep a watch out for the volume trends as we move into January and February before we make that final call.
Then if I can shift on a follow-up just onto the LTL side, how long do you think it's going to take here to rationalize capacity in the industry? Just looking at the aggressive pricing that you've got in the market place, just maybe if you can - if Doug on his way out can just talk a little bit about what plans are for the division, and how long he sees that taking to maybe stabilize a bit. Thanks. (A)Ken, we've been trying to predict when the excess capacity will leave for quite some time, and things seem to change daily with press releases by some of our competitors. But I would say to you that I think capacity is coming out. We've got a competitor or two that continues to lose business at a 40% clip year-over-year. That is capacity coming out.
We are very happy with the volumes we put in the networks now and now have the scale efficiencies that we need. And I think we now have some opportunities to begin to improve the yield going forward, now that we've got the volume that we need to really operate.
Fred, I had a question for you on this proposed rule change from the National Mediation Board on union elections under Railway Labor Act. A couple of the airlines and rails I've spoken to think it is a challenge because you could end up with sort of a minority union. How do you think about this for FedEx? How will you adjust if this rule change actually goes through? (A)Well, I'm going to defer that question to our General Counsel, Chris Richards, who is more up to speed on it than I am. (A)William, this rule change would, as you say, allow for a minority election in the sense that prior to the rule under the National Mediation Board rules, you would have to get 50%-plus-one of the craft or class to vote for a union before a union would be recognized. Under the proposed rule it would just be 50%-plus-one of the actual people who participate in the election. It is a significant change. It overturns 70 years of precedent. But I do want to point out; this is a change to a rule that's very similar to the one that is applicable for elections under the National Labor Relations Act. So we feel confident that we could deal with the situation in any event.
Just as a follow-up for Alan, you mentioned that the volume trends in the November quarter exceeded your expectations. What are you thinking we can see on International Priority and even Ground for the fiscal third quarter?(A)Well, I think Ground has been fairly steady, steady as she goes with their growth rates; and I'll let Dave Rebholz add some color to that. On International Priority, they are going to definitely be strong here in the second half, and there is a couple of reasons for that. One, first of all, the comparisons are fairly easy. But secondarily, when you have by far the best, most reliable, broadest service, the most awesome sales force who can construct specific service portfolios for our customers and the reach and the brand that we have, there is no limit to what we are going to do with IP. (A)First of all, you need to understand that we continue to build our volume base off of acquisition of competitive volume. And the reason why I bring that up is because we have spent a lot of time, effort and energy in improving our value proposition so that we are the best provider of parcel products in the industry. Our customers are recognizing it. Additional customers continue to look at us in that regard. I feel very, very confident that we are going to continue to
grow at the pace we have. The beauty of our organization is that we have a broad portfolio that allows customers to pick and choose the value proposition they would like vis--vis the SmartPost offering, and as evidenced by its growth rate. We are very, very proud of what we have to offer, and we will put ourselves up against anyone and quite frankly we will win.

bozobigtop

Steady as she goes!