SLOWING ECONOMY IMPACTS EARNINGS OF FEDEX, UPS
Integrator giants FedEx and United Parcel Service said Thursday that the slowing U.S. economy will have a harsher than expected impact on their earnings for the current quarter.
Both UPS and FedEx said their holiday-season volumes were flat compared to the year-earlier period.
For UPS, this follows slowed growth in October and November of 4 percent, compared to 5.5-percent growth for the first nine months of 2000. UPS earlier predicted a slight slowdown for fourth-quarter growth, due to one less shipping day, the softening economy and comparison to the robust year-earlier results. The company now expects earnings-per-share growth of 7 to 10 percent for the fourth quarter. The Atlanta-based company also expects to achieve its full-year performance targets.
“We anticipate slight declines in the growth rate for the U.S. domestic business; strong volume growth across international operations; and revenue growth of 30-percent-plus in our logistics business,” said Jim Kelly chairman and chief executive officer of UPS. Barring further economic slowdown, we expect to achieve targets we set for 2001 — 10-percent revenue growth and earnings-per-share growth in the mid-teens.'
FedEx said Thursday that it expects earnings for the quarter ended Nov. 30 to be up 18 percent. However the integrator said it is experiencing a softening in third-quarter volumes due the economy and severe weather conditions.
“As a result, U.S. domestic growth rates at FedEx Express and FedEx Ground are expected to be flat to slightly down for December 2000,” the company said.
Like UPS, FedEx expects continued improvement in its international product, with FedEx International Priority shipments volume growth of 10 to 12 percent anticipated for the third quarter, despite softening Asian outbound volumes.
“As for fiscal 2001 earnings estimates, we now believe that earnings per share will be in the range of $2.50 to $2.60 for fiscal 2001, compared to $2.32 for fiscal 2000,” said Alan B. Graf Jr., chief financial officer.
FedEx will report its second-quarter earnings next Wednesday.