FedEx posts earnings of $2.66 a share vs. $2.68 expected

CNBC with Reuters
FedEx posts disappointing results

FedEx delivered quarterly earnings and revenue that fell short of analysts' expectations on Wednesday, weighed by pension costs, a stronger dollar and lower fuel surcharges.

FedEx shares fell more than 3 percent following the announcement.

It said the loss, compared with a year-earlier profit of $780 million, included a non-cash pretax charge of $2.2 billion due to a move to mark-to-market accounting, announced last week, for employee pensions.

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The company added that unfavorable exchange rates due to the strong dollar also weighed on earnings at its most profitable international segment, as did falling fuel surcharges.

Like other shippers, FedEx levies surcharges as fuel prices rise. As the price of oil comes back down, so do the surcharges which curbs revenue.

"It's clear just how critical Fuel Surcharge revenues are to FedEx overall revenues as this was a major contributor to FedEx missing both earnings and revenue guidance for their fourth quarter," said John Haber, chief executive of Spend Management Experts, which helps companies manage shipping costs, adding that surcharges will continue to weigh on FedEx earnings this year.

The Memphis-based company reported an adjusted net profit for the fiscal fourth quarter ending May 31 of $753 million or $2.66 per share, unchanged from $753 million or $2.54 per share a year earlier.

Analysts had expected earnings per share of $2.68 for the quarter.

In the fiscal fourth quarter, the net loss was $3.16 per share compared with $2.62 profit per share a year earlier.

The company reported revenue for the quarter of $12.1 billion versus $11.8 billion a year earlier. Analysts had expected revenue of $12.3 billion.

FedEx said that for the fiscal year 2016 it expects earnings in the range of $10.60 to $11.10 per share. Analysts have forecast full-year earnings of $10.88.

FedEx announced in April that it had agreed to buy Dutch package delivery firm TNT Express.for $4.8 billion. The deal is awaiting approval by European regulators and the company said the cost of the deal is not included in its earnings outlook.

European regulators blocked a 2013 takeover of TNT by FedEx's main rival United Parcel Service Inc due to concerns it would stifle competition, but analysts say that the combined size of FedEx and TNT in Europe would not threaten competition.

In morning trade, FedEx shares were down 3.1 percent at $176.41.