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FedEx, UPS see earnings fall

May 5, 2008
The country’s two largest delivery carriers reported losses in earnings for the quarter

The country’s two largest delivery carriers reported losses in earnings for the quarter, adding to the long list of companies that have seen revenues increase but earnings shrink due to increased operating costs.

FedEx Corp. reported earnings of $1.26 per diluted share for its third quarter, which ended February 29, compared to $1.35 per diluted share for its third quarter the previous year.

Although revenue increased 10%, from $8.59 billion to $9.44 billion, FedEx’s income fell from $420 million to $393 million, as the company said operating margins declined because of high fuel prices and a weak U.S. economy.

“FedEx faces a challenging economic environment that includes persistently high oil prices, sluggish U.S. growth and continued concerns in the credit markets,” said Frederick W. Smith, FedEx Corp. chairman, president & CEO. “We are managing our costs while positioning our portfolio of global transportation solutions to increase our profitability and returns once conditions improve.”

The company’s outlook for the next quarter isn’t much of an improvement, projecting earnings between $1.60 to $1.80 per share compared to last fourth quarter’s $1.96 per share.

UPS also reported increased revenue, growing from $11.9 billion to $12.7 billion from first quarter of 2007 to first quarter of 2008, but earnings declined 9% from $0.96 to $0.87.

"U.S. economic activity deteriorated more rapidly than expected during the quarter," said Scott Davis, UPS chairman & CEO. "While we will be extremely vigilant with respect to costs in this difficult environment, we will not lose our focus on growing the business. We will continue to invest in the infrastructure, new products and services that will enable our customers to succeed in the global marketplace.

"We see no signs of economic strengthening in the second quarter," said Kurt Kuehn, UPS CFO. "As a result, the company expects earnings for the quarter in a range of $0.97 to $1.04 per diluted share compared to $1.04 for the second quarter of 2007."

Logistics provider Ryder System, Inc. did report increased earnings, from $0.84 per share for the first quarter of 2007 to $0.96 per share for the first quarter of 2008, a 14% increase.

Revenues for Ryder fell from $1.59 billion for the first quarter of 2007 to $1.54 billion the first quarter of 2008, due to a previously announced change from gross to net revenue reporting in a subcontracted transportation agreement, the company said.

"The Ryder team delivered stronger than expected results for the quarter despite a soft overall market environment,” said Ryder chairman & CEO Greg Swienton. “Our fleet management solutions segment drove these results through continued contractual revenue growth, improved commercial rental operations and better than forecasted used vehicle sales results. Our team's focus allowed us to expand overall company margins and increase multi-year contractual business by 6% in a soft transportation market.”

About the Author

Justin Carretta

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