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FedEx Flying Slowly
FedEx (NYSE:FDX) announced fiscal second earnings of $1.10 per diluted share, compared to $1.58 per share a year ago. Revenue of $8.6 billion in the quarter was down 10% from a year ago. While the company cited "positive momentum" in the global economy, FedEx remains very cautious and reserved about the economic future.
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Leaner Days Ahead
In addition to a more positive outlook, FedEx continues to focus on cutting costs and running a leaner business to adapt to the economic new normal. The company is encouraged by the turn in the economy, which looks significantly brighter than the abyss we faced this time last year. FedEx expects next quarters earnings to be in between 50-70 cents a share, compared with 31 cents earned during last years third quarter. The company has even decided to resume merit salary increases in 2010 as a result of the positive signals it is getting. (For related reading, check out Profiting In A Post-Recession Economy.)
Bluer Skies Ahead
While a company like FedEx was not immune to the consequences of the recession, it has its long-term advantages. Along with rival UPS (NYSE:UPS), FedEx enjoys a virtual duopoly in the shipping of packages for consumers and businesses. So, while focusing on cost cutting became a top priority, the company was taking advantage of expanding its business across growth markets as smaller competitors weren't strong enough to navigate the turbulence. The company's strong balance sheet along with excellent management will take the company far in the years to come. But despite the positive signs FedEx is seeing, they still remain cautious with respect to 2010 and this is cause for concern for the economic recovery next year, especially if federal stimulus programs begin disappearing. Cautious outlooks from bellwether stocks like FedEx, Wal-Mart (NYSE:WMT) and Caterpillar (NYSE:CAT) warrant attention. These companies have such a broad reach that they have a unique look into the health of the overall economy.
Cautiously Optimistic
Despite the weaker outlook, FedEx is clearly more upbeat about the state of the global economy going forward. But the general tone is that this will be an economy that is slow to recover, and is not immune to sudden shocks. (For more, check out The Impact Of Recessions On Businesses.)
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IN PICTURES: Eight Ways To Survive A Market Downturn
Leaner Days Ahead
In addition to a more positive outlook, FedEx continues to focus on cutting costs and running a leaner business to adapt to the economic new normal. The company is encouraged by the turn in the economy, which looks significantly brighter than the abyss we faced this time last year. FedEx expects next quarters earnings to be in between 50-70 cents a share, compared with 31 cents earned during last years third quarter. The company has even decided to resume merit salary increases in 2010 as a result of the positive signals it is getting. (For related reading, check out Profiting In A Post-Recession Economy.)
While a company like FedEx was not immune to the consequences of the recession, it has its long-term advantages. Along with rival UPS (NYSE:UPS), FedEx enjoys a virtual duopoly in the shipping of packages for consumers and businesses. So, while focusing on cost cutting became a top priority, the company was taking advantage of expanding its business across growth markets as smaller competitors weren't strong enough to navigate the turbulence. The company's strong balance sheet along with excellent management will take the company far in the years to come. But despite the positive signs FedEx is seeing, they still remain cautious with respect to 2010 and this is cause for concern for the economic recovery next year, especially if federal stimulus programs begin disappearing. Cautious outlooks from bellwether stocks like FedEx, Wal-Mart (NYSE:WMT) and Caterpillar (NYSE:CAT) warrant attention. These companies have such a broad reach that they have a unique look into the health of the overall economy.
Cautiously Optimistic
Despite the weaker outlook, FedEx is clearly more upbeat about the state of the global economy going forward. But the general tone is that this will be an economy that is slow to recover, and is not immune to sudden shocks. (For more, check out The Impact Of Recessions On Businesses.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Sham Gad
Sham Gad is the Managing Partner of Gad Partners Fund's, value inspired investment partnerships modeled after the Buffett Partnerships of the 1950's. Previously, Gad ran the Gad Investment Group and delivered annualized returns of 22% from 2002 to 2005. Gad is also the author of "The Business of Value Investing" which will be out in the fall of 2009. Gad earned his MBA at the University of Georgia in May of 2007. Gad runs a value investing blog. He can also be reached by visiting the Gad Partners Funds site. When not writing or analyzing businesses, Gad enjoys hanging out with his wife Maggie, reading, golf, and yoga
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