CNBC Exclusive: FedEx CEO Upbeat Despite Slowing Economy

By Annalisa Burgos
Wednesday, 28 Mar 2007 | 5:33 PM ET

FedEx is taking a hit from the slowing U.S. economy, but chairman and CEO Frederick Smith told CNBC he’s confident in the company’s business strategy.

“While in our next fiscal year we might not hit our long-term average goal of 10% to 15% earnings growth per year, we’ll still have a substantial EPS growth in FY '08 and we’re pretty comfortable with that,” Smith told CNBC’s Maria Bartiromo on “Closing Bell.”

Positive news at its investors meeting can't stop FedEx from taking a hit due to high oil prices, with Frederick Smith, FedEx chairman & CEO and CNBC's Maria Bartiromo

FedEx said last week third-quarter profit fell from a year earlier as the U.S. economy grew at a weaker pace than expected. The package delivery company, considered a bellweather of the economy, also lowered its guidance for the fourth quarter, fueling concern among investors.

Adding to the headwinds are rising oil prices, which rose above $64 a barrel Wednesday. Smith said higher oil may mean a “slight lag” in business, but the company is able to pass it along in fuel surcharges.

“The main thing to us about high fuel prices over time is what it does to the macro economy and economic demand overall,” he said. “The economy is not as robust now as it was at the end of last summer, housing is in a correction, we certainly are in the midst of an inventory draw-down. … We continue to see growth, just not as robust growth as we saw a year ago.”

Meanwhile, the company continues to focus on global expansion in the form of additional acquisitions and partnerships, especially in China and India. FedEx will launch its domestic express service in China on May 28.

“We’re optimistic about the fundamental forces driving our businesses,” Smith said.

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