FedEx slashed their outlook after the bell citing higher fuel costs and lost revenue due to winter storms. This is just one more sign that rising commodity costs are pinching private sector income statements. FedEx is an economic bellwether so while this is likely not a reason to panic it is a sign that income statements are starting to tighten. With margins near record highs it’s probably not too early to begin wondering if the great margin driven recovery is coming to an end.
MEMPHIS, Tenn.–(BUSINESS WIRE)– FedEx Corporation (NYSE:FDX – News) today announced third quarter earnings have been negatively impacted by an estimated $0.25 per diluted share due to loss of revenue and increased expenses resulting from severe winter storms and higher-than-expected fuel prices. The company now expects as-adjusted earnings, excluding FedEx Freight combination costs, of $0.70 to $0.90 per diluted share for the third quarter ending February 28, compared to the company’s previous guidance of $0.95 to $1.15 per diluted share. This guidance assumes no further weather impact and stable fuel prices for the remainder of the quarter. The company reported earnings of $0.76 per diluted share in last year’s third quarter.
“We experienced significant network disruptions in the U.S. and Europe and unusually high costs from severe winter storms. In addition, fuel prices continued to escalate since we provided our earnings outlook in December,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “We continue to see strength in our base business across all transportation segments and geographies. I would like to take this opportunity to thank all our team members for their hard work and dedication during the recent severe weather events.”
These costs will also impact earnings guidance for the full year, which the company will update when it announces third quarter earnings on March 16, 2011.