FedEx earnings report warns of weak profits

FedEx's earnings report could dictate stock market activity today, as the Memphis, Tenn.-based company is seen as a bellwether for the broader economy. FedEx delivers business packages all over the world, so when its busines is slow that means global activity is as well.

FedEx today reported fiscal first-quarter earnings of $181 million, or 58 cents per share. In the same period a year ago FedEx made more than double that profit -- $384 million for $1.23 per share. Revenue was $8 billion, a 20 percent drop.

FedEx's earnings were essentially in line with analyst estimates.

FedEx CEO Frederick W. Smith said in the release that the earnings were "above our initial expectations in the first quarter." He noted that the company has "vigilantly managed costs without sacrificing service" and that it will "emerge a stronger, more profitable company as the global economic recovery takes hold."

FedEx's earnings were negatively affected by the global recession, the company said.

FedEx said it expects to earn between 65 cents and 95 cents per share in the second quarter, down from $1.58 in the same quarter a year ago. It is looking for a "continued modest recovery in the global economy."

"While we see signs of improvement in the economy, the year-over-year comparisons will remain very difficult for our second quarter," said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer, in the company's earnings release. "We remain focused on managing our expenses and generating positive cash flow."

FedEx noted in the earnings report that it will increase shipping rates by about 6 percent effective Jan. 4.

Written by Bill Freehling