FedEx profit lags Street view

FedEx Corp forecast profit for the current quarter that missed expectations and its CEO warned that the economic recovery's pace may slow, pushing shares down more than 3 percent. The company, seen as an economic bellwether because its planes and trucks ship a variety of merchandise around the world, has been on a strong growth footing in recent months, and on Thursday raised its profit forecast for its full 2011 fiscal year for the second time.
It also said its first-quarter profit more than doubled as business and consumer spending sparked more demand for its package delivery services But CEO Fred Smith said he expects the pace of the world's economic recovery to slow in the months ahead. "We expect a phase of somewhat slower economic growth going forward," Smith told analysts on a conference call. "Slower growth is consistent with historic business cycles."
The Memphis, Tennessee-based company forecast a second-quarter profit below Wall Street's expectations, and said some costs would rise this fiscal year as it resumes some employee benefit programs that it had halted during the worst of the recent recession. FedEx shares fell 3.8 percent to $82.65, and those of larger rival United Parcel Service Inc fell 1.6 percent to $66.56 on a day the Standard & Poor's 500 index was down about 0.5 percent.
FedEx said profit in its fiscal first quarter that ended August 31 was $380 million, or $1.20 per share, compared with earnings of $181 million, or 58 cents per share, a year earlier. Revenue rose 18.1 percent to $9.46 billion, topping the consensus Wall Street estimate of $9.42 billion. FedEx raised its full-year profit forecast to $4.80 to $5.25 per share, excluding the cost of merging some ground operations. It forecast second-quarter profit of $1.15 to $1.35 per share. Wall Street expected a profit of $1.36 per share.
But in a sign that it would continue to cut costs, the company said it plans to merge its FedEx Freight and FedEx National less-than-truckload operations on January 30, a move that will cost some $150 million to $200 million and eliminate 1,700 jobs during fiscal 2011, but will boost profits starting in fiscal 2012. FedEx employs about 245,000 people world-wide, including staff and contractors. As of Wednesday's close, FedEx stock was up about 2 percent so far this year, outpacing the 0.5 percent rise of the Standard & Poor's 500, but lagging UPS's 18 percent gain.