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Thursday, March 22, 2012 11:29 AM

FedEx Lowers Outlook Due to Tepid Economic Growth

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All is not well in the global economy and FedEx knows it. Reuters reports FedEx global economic view darker, shares drop

A strong holiday season and mild winter helped FedEx Corp beat Wall Street's profit forecast, but the world's No. 2 package delivery company warned that it had lowered its outlook for the rest of this year due to tepid economic growth.

"The fourth quarter is still very good, but what we're seeing at the moment ... is we just don't have as strong an economy as we would have hoped it would be a year ago," Chief Financial Officer Alan Graf told analysts on a conference call.

"The economic environment and the elasticity that we're seeing on our premium services due to high fuel costs are dampening momentum a bit."

The company said more expensive fuel was prompting customers to choose to ship goods by truck rather than air to save money.

FedEx is undergoing a fleet upgrade to improve fuel efficiency, having announced in December that it was buying new Boeing aircraft to replace some aging planes and delaying delivery of others to cut expenses.

Graf said FedEx will continue to reduce flight hours and park planes in the desert until economic conditions improve.

The massive volume of goods moved by FedEx makes its shipping trends a bellwether of consumer demand and the pace of economic growth.
Expect more profit warnings from companies because they are coming.

Mike "Mish" Shedlock
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