On Wednesday FedEx Corp (NYSE:FDX) announced earnings for Q4. The numbers can be seen as both promising and disappointing, leaving investors to speculate on not only the outlook for FedEx but the global economy as well.
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FedEx reported a fourth quarter loss of $876 million, or $2.82 per share, beating analysts' estimates. This compared to a loss of $241 million in the same quarter last year. While revenues fell short of the estimate of $8.32 billion, falling 20% year-over-year to $7.85 billion. The logistics firm saw its shares fall 1.4% on trading Wednesday to stand at $50.70, down 20% year-to-date.
FedEx also incurred charges of $1.2 billion resulting mostly from impairment charges related to the acquisitions of Kinko's and Watkins Motor Lines. As well, FedEx lowered guidance for the first quarter of 2010 to 30-45 cents per share. These numbers leave analysts and pundits weighing the outcomes and speculating how they relate to the overall world economy. FedEx, along with rival United Parcel Service (NYSE:UPS) have long been considered bellweathers of the economy, since many of their products and services are heavily dependent on corporate spending and a healthy economy. UPS posted disappointing revenue and earnings numbers in it's most recent earnings announcement in April, falling short of analysts' estimates, and lowered guidance for Q2 in the process.
FedEx CEO Fred Smith said in the earnings call that the economic conditions FedEx faced in recent quarters were the toughest "in [the] company's history", and blamed the poor revenue numbers on the recent increase in fuel prices. He also hinted that the next two quarters could be "extremely difficult", while at the same time saying that "there were signs that the worst of the recession is behind us and we remain optimistic that we will see quarter-over-quarter economic improvement later this calendar year".
The Bottom Line
With such a mixed bag of results along with the uncertainty of managment of what the coming fiscal year holds, FedEx does not seem like a smart play for the short term. With oil prices back over $70 a barrel and few signs of an improving global business environment,it may be time to expedite FedEx from the portfolio and seek gains in other sectors. (To learn more, check out Earnings Forecasts: A Primer.)