Fed Ex doesn't deliver
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September 16, 1999: 5:11 p.m. ET
Overnight delivery company cites fuel prices, warns on remainder of year
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NEW YORK (CNNfn) - Shares of FDX Corp. tumbled more than 13 percent Thursday after the holding company for overnight delivery service Federal Express missed Wall Street's earnings expectations, and warned on the rest of the year.
Shares of the Memphis, Tenn.-based freight company ended the day Thursday down 5-11/16 at 38. More than 9.28 million shares changed hands, almost 10 times the average trading volume on the stock.
FDX (FDX) said income for its fiscal first quarter ended Aug. 31 rose 6.7 percent to $159 million, or 52 cents a diluted share from $149 million, or 50 cents a year earlier. The mean estimate of analysts surveyed by First Call/Thomson Financial was for earnings of 54 cents a share in the latest quarter.
Revenue rose 5.8 percent to $4.32 billion from $4.08 billion in the year-ago period.
Alan B. Graf Jr., executive vice president and chief financial officer, said higher fuel prices and declining sales of hushkits -- noise reduction units for older jets designed to extend their operating lives -- hurt operating income in the quarter by $27 million.
FDX stock activity over the last year
He said average U.S. domestic daily package volume at Federal Express and its RPS Inc. subsidiary, North America's two largest package express carriers, grew 3 percent and 4 percent, respectively, both below expectations for the quarter.
The company said it has enacted stringent cost controls to offset the expected slowdown in U.S. package volume and higher fuel prices.
Even so, Graf said, if current trends continue, fuel prices alone could add $150 million to fiscal 2000 operating costs compared with 1999.
Graf said that if U.S. domestic growth continues to slow, earnings for the second quarter and full fiscal year may fall below analysts' expectations, and FDX may not achieve double-digit operating income growth for the year.
Tom Burnett, president of Merger Insight Inc., said FDX was hit by "a combination of negatives."
"I think the stock was overheated," he said. "It had run up a lot earlier this year on the Internet wave, because they actually deliver the things people order on the Web. The costs are going up on jet fuel prices and they missed expectations."
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Federal Express
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