Sun, May 11, 2008 - Page 11 News List

Fuel costs lead to FedEx cutting earnings forecast


FedEx Corp cut its fourth-quarter earnings expectations on Friday, blaming continuing increases in fuel costs.

The Memphis-based shipping company said it expects profits of US$1.45 to US$1.50 per share for the three months ended May 31, down from its previous prediction of US$1.60 to US$1.80 per share.

Analysts surveyed by Thomson Financial predicted quarterly earnings of US$1.69, down from earlier expectations of US$1.95.

“Since we provided earnings guidance for the fourth quarter in March when the crude oil price was slightly above US$100 per barrel, our estimated fuel costs for the quarter have increased more than 7 percent, or US$100 million from our previous estimate,” said FedEx chief financial officer Alan Graf.

FedEx customers pay surcharges to help offset fuel costs, but “they cannot keep pace in the short-term with rapidly rising fuel prices,” Graf said.

Graf also said that the new earnings forecast “assumes no additional increases to the current fuel price environment and no further weakening of the economy.”

Oil rose above US$126 a barrel for the first time on Friday, bringing its advance for the week to nearly US$10.

FedEx also said the weak US economy is holding down demand for domestic express shipments and less-than-truckload freight services.

The company is often seen as a bellwether for the US economy.

The company’s difficulties in financial predictions are because of fluctuating fuel costs, said analyst Dan Ortwerth of Edward Jones.

In March, FedEx reported a 6 percent drop in third-quarter earnings, also citing high fuel costs and the sluggish economy.

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