Higher Fuel and Infrastructure Costs Weighed on FedEx Q3 Results

The parcel-delivery giant, FedEx posted its Q3 results on Tuesday after the regular trading hours. Q3 being the holiday season, it moved mountains of packages, but still failed to meet the analysts’ expectations.

During this quarter that ended on Feb. 28, the company earned a total of $638 million, which comes to $2.35 per share. Compared to the same quarter earlier, it was down by 8%. Then the company has given $2.51 a share from $692 million. The analysts had predicted $2.63 a share for this quarter and the company was nowhere close to it. Analysts feel that the company felt the heat because of the higher fuel and infrastructure costs.

This quarter included the holiday season of December when there is a big surge in buying and hence shipping. The record-setting peak days of December are very critical for any parcel delivery company and the FedEx CEO Frederick W. Smith was pleased that the company pulled through those critical days smoothly.

For the current fiscal year, the company has kept the same earnings forecast, but has revised the EPS (earnings per share). Including the earnings of TNT Express that the company had acquired last year, FedEx expects the adjusted EPS to be in the range of $10.80 to $11.30. The earlier forecast was from $10.95 to $11.45.

The chief financial officer of FedEx Alan B. Graf Jr is of the opinion that in the coming three years, the company will be benefitted by the acquisition of TNT Express it made last year, another global package delivery service. Some of the analysts like Jim Corridore of CFRA Research are also of the opinion that the company will prosper in the coming year despite going through the “growing pains” that are bound to happen from the growth of e-commerce.

By fiscal 2020, the company expects to take its operating income from $1.2 billion currently to $1.5 billion if the economic factors and the current taxation rules continue to hold.

As soon as the third quarter results were declared, the shares of the company dropped by more than 4 percent in after-market trading. The conference call that followed to discuss the results, however, reversed all the declines and the shares, in fact, ended up by 2 percent.

Add Comment