FedEx Corp lowered its fiscal 2013 profit target on Tuesday, saying earnings could slide as much as 6 percent for the year, as a weakening world economy prompts customers to shift toward lower-priced and slower shipping options. The world's second-largest package delivery company said makers of electronics and mobile phones had begun to move more of their cargo on ships as pressure on their selling prices makes the cost of air freight harder to bear.
"A lot of traffic is moving onto the water because moving goods by air is very energy-intensive," Chief Executive Officer Fred Smith told investors on a conference call. "You can't have jet fuel going up to close to $4 a gallon on occasion without it having a big effect on the choices people make."
FedEx said it expected a profit of $6.20 to $6.60 per share for its fiscal year, which ends in May. That is below both its prior forecast of $6.90 to $7.40 and Wall Street's estimate of $7.03. FedEx's larger rival, United Parcel Service Inc, had cut its 2012 profit forecast in July, but the midpoint of the revised range would still represent roughly 9 percent growth.
FedEx's shares fell 1.7 percent to $87.78 on the New York Stock Exchange. Profit in the just-ended first quarter was heavily weighted by FedEx's express segment, which handles overnight package delivery by aircraft. Operating earnings in the segment fell 28 percent, and US package deliveries were down 5 percent. Net income fell 1 percent to $459 million, or $1.45 per share, in the first quarter ended on August 31 from $464 million, or $1.46 per share, a year earlier. Revenue rose 3 percent to $10.79 billion.
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