SAN FRANCISCO – FedEx Corp. (FDX), the world's largest air-express carrier, Thursday posted a 9 percent increase in quarterly profit on global economic growth, but said first-quarter earnings could fall below Wall Street estimates due to high fuel prices.
Shares of FedEx, considered a gauge of economic health because it carries products ranging from raw materials to finished goods, fell $3.22, or 3.7 percent, to $84.90 in premarket trading on Inet.
Net income rose to $448 million, or $1.46 a share, for the fourth quarter ended May 31, from $412 million, or $1.36 a share, in the year-earlier quarter. Sales rose 10 percent to $7.72 billion from $7.04 billion.
Analysts, on average, expected FedEx to earn $1.48 a share on sales of $7.82 billion, according to Reuters Estimates.
FedEx blamed high jet fuel prices (search) for the shortfall in its earnings forecasts, although some on Wall Street said the company's comments also reflected heightened competition with rival United Parcel Service Inc.
"They're saying fuel, but I think it's probably a lot more than that," said Mark Davis, the transportation analyst with FTN Midwest. "I think UPS is out in the marketplace being a lot more aggressive."
Revenue at FedEx Express, the company's largest business, rose 9 percent to $5.12 billion. Its ground delivery business saw revenue increase 17 percent to $1.23 billion.
Davis said FedEx would face the toughest growth prospects in its ground and freight business. Average daily less-than-truckload (LTL) shipments, a measure of its freight unit, grew 3 percent in the quarter, a level that Davis said was below his expectations.
"They're getting some pressure from the biggest competitor out there in the marketplace on the ground side," he said, referring to UPS (UPS). "We've seen a little bit of some signs of weakness in the LTL space, so that could be impacting their freight volumes."
The company targeted first-quarter earnings in a range of $1.10 to $1.25 a share, with full-year earnings of $5.20 to $5.45 a share. Analysts, on average, expected first-quarter earnings of $1.26 a share and full-year profit of $5.51 a share.
"This earnings guidance reflects the recent escalation in jet fuel prices which are expected to remain elevated during the quarter," the company said in a statement, referring to its first-quarter forecast. The company also blamed a time lag in implementing a fuel surcharge, start-up expenses for around-the-world flights, and competitive pricing in U.S. package services.
In May, Memphis-based FedEx affirmed it expected to earn between $1.40 and $1.50 a share in the fourth quarter, citing particular strength in the manufacturing and wholesale sectors.