Winter Storms Take A Bite From FedEx Profits (NYSE:FDX)

Severe winter conditions hurt FedEx Corp’s quarterly earnings and revenue for the third quarter of its fiscal year. FedEx said operating income decreased by about $125 million in the third quarter as the unusual weather across the nation disrupted operations, reduced shipping volumes and increased costs. The brutal winter had a significant impact on the shipping industry. For 2-1/2 months straight, temperatures across the country ran 6 to 10 degrees Fahrenheit (3.3 to 5.5 degrees Celsius) below normal.

For the third quarter, FedEx reported earnings of $378 million, or $1.23 a share. This was higher than the $361 million, or $1.13 a share, reported in the previous year. According to Thomson Reuters I/B/E/S, analysts were expecting reported earnings of $1.45 a share. Revenue rose 3 percent to $11.3 billion. This was lower than analyst’s forecasts of $11.43 billion in revenue.

The results prompted FedEx to cut its fiscal-year profit forecast. The company had predicted earnings of $6.73 to $7.10 for the year previously, but lowered its forecast to $6.55 to $6.80 a share for the year after announcing the third quarter results. Analysts had made prediction of $6.89. However, FedEx did announce that its plan to improve earnings at the FedEx Express air delivery unit by $1.6 billion by the end of 2016 was still on track.

Morningstar analyst Keith Schoonmaker said that analysts expected weather conditions to hurt FedEx, but it was difficult to estimate the financial impact without interim data. In a note to clients, Deutsche Bank analyst Justin Yagerman wrote, “While we were disappointed with the third-quarter earnings miss, the shortfall was due to weather-related costs. FedEx remains one of our favorite ways to benefit from an improving economy.” FedEx is currently the world’s No. 2 package delivery company.

FedEx was not the only company hurt by the severe weather. McDonald’s Corp partly blamed a decrease in January sales on the frigid cold and snow. Vitamin and nutritional supplements retailer GNC Holdings Inc warned that the weather hurt their quarterly results and that its first-quarter results would miss expectations. Ford Motor Co, air carrier United Continental Holdings Inc and railroad operator CSX Corp have also said the weather affected operations in the first quarter.



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