DALLAS (AP) – FedEx reported disappointing results for its latest quarter, and the delivery giant cut its full-year profit forecast on weaker demand for freight services and higher costs in its ground division.
The company also said it plans to hire about 55,000 seasonal workers for the holidays. At this time last year, FedEx announced it would hire 50,000 seasonal workers for the holidays.
Its shares fell about 2.5 percent in premarket trading 45 minutes ahead of Wednesday’s opening bell.
FedEx Corp. said that it expects to earn between $10.40 and $10.90 for the fiscal year that ends next May, down 20 cents from an earlier prediction. Analysts expected $10.84, according to a survey by FactSet.
The reduced outlook comes despite rate hikes averaging 4.9 percent, which will take effect Jan. 4, and higher surcharges for ground shipment of heavy or large packages, which begin in November. The company said it still expects earnings to grow over the previous year because of cost-cutting, higher revenue and growth in online commerce.
Chairman and CEO Fred Smith said the company was “performing solidly given weaker-than-expected economic conditions, especially in manufacturing and global trade.”
The holiday-hiring plans were announced a day after rival UPS said that that it plans to hire 90,000 to 95,000 extra workers, about the same that it hired last year.
In the quarter that ended Aug. 31, FedEx earned $692 million, up 6 percent from a year earlier. Earnings per share amounted to $2.42, short of the $2.44 per share average forecast of 12 analysts surveyed by Zacks Investment Research.
Revenue rose 5 percent, to $12.3 billion. Six analysts surveyed by Zacks expected $12.23 billion.
FedEx has been hit in recent years by a decline in priority international shipping, which has caused revenue in its Express unit to stagnate. But the boom in online shopping has boosted results at FedEx Ground.
In the latest quarter, ground revenue rose 29 percent but operating income was basically flat on higher costs for larger packages and self-insurance. The express unit saw higher income because of higher base rates, while income fell in the freight business on higher labor costs.
In premarket trading about an hour before the opening bell, FedEx shares were down $3.85, or 2.5 percent, to $150.15. They closed Tuesday down 11 percent for the year and 17 percent below a record high on June 11.
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