FedEx says 2Q earnings down 6%

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FedEx Corp. today, Dec. 20, reported net income for the second quarter of $479 million, down 6 percent from last year’s $511 million. Operating income was $783 million, down 7 percent from $839 million a year ago. Revenue was $9.45 billion, up 6 percent from $8.93 billion the previous year.

“High fuel prices and weak U.S. economic growth year over year have impacted our business,” said Frederick W. Smith, chairman, president and chief executive officer of Memphis, Tenn.-based FedEx Corp. “We continue to benefit from solid international growth, which helps mitigate softness in U.S. industrial production. While we see challenging near-term economic trends, we remain confident about long-term prospects in all our business segments.”

Operating margin declined primarily due to the net impact of substantially higher fuel costs and continued weakness in the U.S. economy, which the company said is limiting demand for its U.S. domestic express package and less-than-truckload freight services. Total combined average daily package volume in the FedEx Express and FedEx Ground segments grew 8 percent year over year for the quarter, due to growth in ground and FedEx International Priority shipments, and an increase in international domestic express shipments resulting primarily from recent international acquisitions.

“As we noted last month, higher fuel prices and continued weak growth in the U.S. economy have hindered profitability,” said Alan B. Graf Jr., FedEx Corp. executive vice president and chief financial officer. “While we have indexed fuel surcharges in place, they cannot keep pace in the short term with rapidly rising fuel prices. We are implementing cost-containment actions to manage near-term expenditures and have reduced our capital spending forecast. We will continue, however, to invest in strategic projects related to our long-term growth plans.”