FedEx Corp on Tuesday dropped the most in more than five years after increased labor costs and a bumpy integration effort for the company’s TNT Express acquisition weighed on profit.
The weak performance got FedEx off to a “messy start” in its new fiscal year, Morgan Stanley said in a note to clients, but FedEx is betting on a rebound, raising its full-year earnings target by US$0.20 a share to as much as US$17.80.
That puts pressure on the company to perform much better in the holiday season and the rest of its fiscal year ending on May 31 next year.
“The end result is that the guide is even more back-half loaded and highly dependent on the successful capture of expected TNT synergies and improved revenue mix at TNT,” Stephens Inc analyst Jack Atkins said in a note on Tuesday.
FedEx fell 5.5 percent to US$241.58 at the close in New York, the biggest one-day drop since March 2013.
The shares have dropped 3.2 percent this year through Tuesday, while the Standard & Poor’s 500 Index has gained 8.6 percent.
Increased compensation reduced earnings by US$170 million, or US$0.48 per share, during the fiscal first quarter, dragging results below analysts’ estimates.
The courier is also struggling to boost profit at TNT, a European operation that FedEx bought in 2016 for US$4.8 billion. The unit last year suffered a cyberattack that drove away customers and increased costs.
Salaries and benefits jumped 11 percent in the quarter and are to show large gains in the fiscal second quarter because, with the US corporate tax cut, FedEx decided to accelerate wage increases to April next year instead of October, said Helane Becker, an analyst with Cowen & Co.
FedEx also faced fuel costs that rose 40 percent, she said.
“You have very tough year-over-year comps in that line item for six months,” Becker said in an interview with Bloomberg TV.
Later this year, “the numbers won’t look so huge,” she added.
Earnings climbed to US$3.46 a share in the first quarter, trailing the average of analysts’ estimates by US$0.34. Sales of US$17.1 billion outpaced expectations of US$16.9 billion.
For the full fiscal year, earnings are to be US$17.20 to US$17.80, FedEx said.
Dutch brewing company Heineken NV yesterday said that it has reached an agreement to acquire a subsidiary brewery of Taiwan’s Sanyo Whisbih Group (三洋維士比集團). Heineken is to assume majority ownership and management rights of the Long Chuan Zuan Co (龍泉鑽興業) brewery in Pingtung County’s Neipu Township (內埔), the Dutch company said. It would become the first multinational brewing company to operate brewery in Taiwan once the acquisition is completed. The deal has been approved by the Ministry of Economic Affairs’ Investment Commission, but details of the financial transaction cannot be disclosed at this time, as terms of the settlement have not been completed,
WHOLLY OWNED SUBSIDIARY: Costco Wholesale said it expected the purchase of the remaining 45 percent stake to add 1 to 1.5 percent to its earnings per share US-based Costco Wholesale Corp on Thursday said that it had purchased the remaining 45 percent stake in Costco President Taiwan Inc (台灣好市多) for US$1.05 billion, making the local company a fully-owned unit. “We estimate that the purchase would add about 1 to 1.5 percent to [our] earnings per share,” Costco said in a statement. Costco President Taiwan was established as a joint venture with Kaohsiung-based President Group (大統集團), which held a 45 percent stake. Since the first Costco store opened in Kaohsiung in 1997, 14 outlets have been set up in Taiwan, company data showed. PROFITABLE Three Costco stores in Taiwan — in Taipei’s Neihu
MOBILITY SOLUTIONS: Tata Technologies’ participation marks more progress in Hon Hai’s efforts to expand its ecosystem through the platform, the Taiwanese firm said India’s Tata Technologies Ltd has become the latest member of Hon Hai Precision Industry Co’s (鴻海精密) MIH Open Platform to jointly develop sustainable mobility solutions for customers worldwide, the Taiwanese company said yesterday. It might include embedded and electrical, electric platform development and battery management system solutions, among others, Hon Hai said. Tata Technologies’ participation marks more progress in Hon Hai’s efforts to expand its electric-vehicle (EV) ecosystem through the MIH platform, it said. The open platform has about 2,380 members around the world, with an aim to jointly develop EV ecosystems and shrink the time to market for products. Hon Hai made the
Mobile phone chip designer MediaTek Inc (聯發科) plans to launch its first semiconductor chip facility in the US midwest with support from a state transition assistance package from the Indiana Economic Development Commission, the company said on Tuesday. MediaTek unveiled the new talent development initiative during the SelectUSA Investment Summit in National Harbor, Maryland, following in the steps of silicon wafer manufacturer GlobalWafers Co (環球晶圓), which on Monday announced an investment of US$5 billion for an advanced 12-inch factory in Texas. MediaTek said in a statement that it intends to form new research partnerships with Purdue University in West Lafayette, Indiana, to