On Tuesday, the package delivery giant reported that due to slow global economic growth its earnings during the next 12 months will be adversely affected. The Memphis-based company vowed to make substantial cost cuts to offset any fall in package shipments. The company predicts moderate growth in world economy due to slower growth in Asia and debt crisis in Europe.
During the quarter under review, FedEx earned $1.73 for each share, as compared to $1.75 for each share, a year ago. Revenue increased to $11 billion from $10.55 billion. FedEx is facing a large number of hurdles, including higher pension costs and salaries, as well as customers’ preference to cheaper shipping alternatives in order to save money.
For fiscal year 2013 FedEx predicts earnings in the range of $6.90 to $7.40 per share. Analysts predict earnings of $7.39 per share. Analysts say that although the earnings forecast emphasized a declining world economy, increased costs were the key reasons. FedEx disappointed Wall Street. A reorganization in Express unit of FedEx in the United States, including job cuts, might enhance earnings in the long term.
The company is removing additional aircrafts to trim down its express network because more and more customers prefer slower shipping services to save money.
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