By Tom Murphy, AP
FedEx’s second-quarter earnings soared 23 percent, but the package delivery company missed Wall Street forecasts due partially to a lower-than-expected benefit from falling fuel prices.
FedEx also said Wednesday that a jump in plane maintenance blunted gains the company reaped from managing costs, lowering its pension expense and growing its export package revenue.
Shares of the Memphis, Tennessee, company fell more than 4 percent in midday trading.
FedEx has been saving money from cheaper fuel, but company executives told analysts that fuel delivered only a slight benefit to operating income in the quarter. The company buys its fuel based on contracts tied to prices set during the preceding week or month, and those prices did not decline as quickly as daily rates, which fell almost 30 percent from August to November.
The company said it was working to adjust more quickly to those daily market rates.
Removing the fuel issue, analyst Benjamin J. Hartford said he saw ��clear margin improvement in the core Express business�� in the quarter. Hartford covers FedEx for Robert W. Baird & Co.
Overall, FedEx Corp. earned US$616 million, or US$2.14 per share, in its fiscal second quarter, up from US$500 million, or US$1.57, in last year’s quarter. Total revenue climbed 5 percent to US$11.94 billion.
Analysts expected FedEx to earn US$2.22 per share on revenue of US$11.97 billion, according to Zacks Investment Research.
FedEx planned to hire 50,000 seasonal workers and invest in its ground-shipping network to make deliveries on time. The company has forecast a record number of deliveries, 8.8 percent more than the holidays in 2013.
FedEx executives offered no details on shipping volume so far this season, but company executives told analysts during a conference call that they’ve already had several days that rank among the busiest in company history. They also noted that labor issues at West Coast ports have held up cargo and forced the company to shift resources, which raises expenses.
CEO and Chairman Fred Smith said he expects that the port issues will lead to more retail items being out of stock and could cause more gift card purchases instead of merchandise.
FedEx also said Wednesday that it still expects full-year earnings of between US$8.50 and US$9 per share.
Analysts surveyed by FactSet forecast earnings of US$9.11 per share for the year.
Shares of FedEx fell US$7.62, to 4.4 percent, to US$166.64 in midday trading while broader indexes had climbed slightly. The stock had climbed 21 percent since the beginning of the year through Tuesday’s close, more than tripling the gain of the Standard & Poor’s 500 index.