Business & Investment

FedEx lowers forecasts due to rising costs and raises prices

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FedEx Corp. suffered rising costs due to stagnant package growth, courier companies lowered their annual earnings outlook, and quarterly profits fell short of analysts’ expectations. FedEx fell 4.1% in New York after normal business hours.

FedEx said in a statement that adjusted earnings for the first quarter through August 31 were $ 4.37 per share, down from $ 4.87 in the year-ago quarter. Analysts expected $ 4.92, according to 24 estimates compiled by Bloomberg News. The unadjusted operating margin was 6.4%, down from 8.2% in the previous year.

Related: FedEx sets rate hike

According to the company, labor shortages have boosted wages, reduced network efficiency and increased the need to hire external transportation services, causing costs to suffer due to tight labor markets. This has led to a $ 450 million cost increase from a year ago. “Due to continued supply chain disruption, domestic parcel demand in the United States has slowed compared to the company’s previous forecasts,” so the average daily package volume for both express and ground units was unexpectedly the previous year. It decreased slightly in proportion.

FedEx President and Chief Operating Officer Radisabura Manium said:

As a result, FedEx has lowered its adjusted earnings per share forecast for the full year from $ 19.75 to $ 21.00. This does not include costs due to the integration of TNT Express and fluctuations in the value of pension funds. The previous range offered in July after the company’s 2021 fiscal year ended May 31 was $ 20.50 to $ 21.50. The company has left its capital investment target for this year unchanged at $ 7.2 billion.

“For the upcoming peak season, service remains our focus and we are investing in resources and capacity to meet our customers’ needs,” said Subramaniam.

The company’s stock fell 3.4% until September 20, but the Standard & Poor’s 500 Index rose 16%.

FedEx’s profit margins are being squeezed as online shopping home delivery grows faster than commercial services. The latter has a higher yield. This is because more luggage is left in one place and less driving between stops. FedEx CEO Fred Smith has taken steps to boost profits, including a seven-day transition to service and the adoption of large packages.

Still, the pandemic boosts FedEx, and powerful e-commerce capture allows courier companies to raise prices and focus on profitable packages from small shippers. Express units are also benefiting from more packed planes as international commercial flights carrying cargo have not yet recovered. The company announced on September 20 that it will raise its price by 5.9% in January after a long-standing price increase of less than 4.9%. The company has already announced significant additional charges for the Holiday Package Rush.

FedEx’s quarterly revenue is $ 22 billion, slightly above analysts’ estimated $ 21.9 billion. Revenue per package increased 15% for Express Units and 10% for Ground Units during the quarter. In FedEx’s freight sector, both volume and yield improved, with an increase in operating margin from 15% in the previous year to 17.3%. Revenue per package increased 15% for Express Units and 10% for Ground Units during the quarter.

FedEx is ranked second NS Transport Topic Top 100 List of Largest Employment Carriers in North America..

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FedEx lowers forecasts due to rising costs and raises prices

https://www.ttnews.com/articles/fedex-cuts-forecast-rising-costs-smother-price-hikes FedEx lowers forecasts due to rising costs and raises prices

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