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FedEx Misses Q2 Top And Bottom Line, Pushes Futures Lower

Tyler Durden's picture




 

After reporting Q2 results that missed substantially on both the top and the bottom line, FedEx is now down over 3%, and is pushing the broader futures lower. The company which was expected to make $9.77 billion in revenue and $1.32 in EPS, made only $9.63 billion and $1.16 in adjusted EPS. And just like every other institution in the US, the firm hopes to make up for its current loss in the future: FedEx actually boosted its adjusted year end EPS projections from $4.80 to $5.25 to $5.00 to $5.30, on consensus of $5.20. Yet while everyone is happy for the company's optimism, having such a substantially subpar quarter at a time when the firm should have been benefiting materially from a restocking and/or liquidating economy and an expected "surge" in logistical expenditures, will make quite a few people scratch their heads. The only question is whether, just like Cisco and Best Buy previously, this surprising miss will be attributed to company specific factors, or the sell-side analysts finally realize there are systemic factors which are actually impacting companies broadly in a downward fashion.

From the press release:

Second Quarter Results

FedEx Corp. reported the following consolidated results for the second
quarter:

  • Revenue of $9.63 billion, up 12% from $8.60 billion the previous year
  • Operating income of $469 million, down 18% from $571 million last year
  • Operating margin of 4.9%, down from 6.6% the previous year
  • Net income of $283 million, down 18% from $345 million a year ago

While shipments and yields grew in all transportation segments, earnings
were reduced by costs related to the January 30, 2011 combination of
FedEx Freight and FedEx National LTL operations, including severance
costs associated with personnel reductions and non-cash asset impairment
charges. Earnings were also reduced by a reserve for a legal matter at
FedEx Express. The reinstatement of certain employee compensation
programs, and higher pension and aircraft maintenance expenses, also
impacted earnings.

Outlook

FedEx projects earnings to be $0.95 to $1.15 per diluted share in the
third quarter and $5.00 to $5.30 per diluted share for fiscal 2011, up
from the company’s previous estimate of $4.80 to $5.25 per diluted
share. This guidance excludes any FedEx Freight combination costs and
the second quarter legal reserve, and also assumes stable fuel prices
and continued moderate growth in the global economy. Including costs
from the FedEx Freight combination and the legal reserve, earnings are
expected to be $0.78 to $1.04 per diluted share for the third quarter
and $4.59 to $4.95 per diluted share for fiscal 2011. The company
reported earnings of $0.76 per diluted share in last year’s third
quarter. The capital spending forecast for fiscal 2011 remains $3.5
billion.

“Our operating performance in the quarter was impacted by strong
compensation and benefits headwinds as we reinstated programs curtailed
during the recession,” said Alan B. Graf, Jr., FedEx Corp. executive
vice president and chief financial officer. “During the quarter, we also
realized more normalized growth in FedEx International Priority®
shipments and higher fuel prices than our earnings guidance had assumed.
Yield improvement and cost management remain our focus. We expect
margins to improve in the second half of fiscal 2011 and in fiscal 2012,
as we continue to benefit from solid global demand for our
differentiated services and as certain cost headwinds subside next
fiscal year.”

 

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Thu, 12/16/2010 - 09:00 | 811108 docj
docj's picture

...will make quite a few people scratch their heads.

Phht - that's nothing a couple of hits from the hopium hukka won't fix.

Thu, 12/16/2010 - 09:02 | 811109 aint no fortuna...
aint no fortunate son's picture

it'll be forgotten before the open - its just another POMO day (what else is new)

Thu, 12/16/2010 - 09:04 | 811115 Racer
Racer's picture

Yes exactly, who cares about companies any more, free money to churn and front run fundamentals traders, that's all the Banksters need. In fact the more  of them the better to fleece yet again

Thu, 12/16/2010 - 09:38 | 811156 Saxxon
Saxxon's picture

Yep.  Non-event.

Thu, 12/16/2010 - 09:45 | 811173 Stock-Paper-Silver
Stock-Paper-Silver's picture

In general I would agree, but POMO was not successful yesterday in manufacturing unicorn skittles. Not sure they have complete control right now.

Thu, 12/16/2010 - 09:02 | 811110 UGrev
UGrev's picture

but but but...ONLINE SALES WERE AWESOME!!! (must be shipping via ups then, eh?)

Mon, 01/24/2011 - 08:30 | 811113 Clapham Junction
Clapham Junction's picture

(d)

Thu, 12/16/2010 - 09:05 | 811117 Robslob
Robslob's picture

The "elites" gold and silver shipments to their "flight to safety" country of choice must be down dramatically...

Thu, 12/16/2010 - 11:13 | 811378 szjon
szjon's picture

I'm no elite but I stopped using fedex because of their intrusive policy of handing PM packages over to customs here in Europe. It cost me thousands in VAT on silver. I now use anyone else, as should everybody.

Thu, 12/16/2010 - 09:09 | 811118 papaswamp
papaswamp's picture

It's fluke....just like Best Buy and General Mills (also missed this morning). Ignore and rally on because the government says all is well and recovering. I think I spilled my cup of sarcasm all over my keyboard.

"This guidance excludes any FedEx Freight combination costs and the second quarter legal reserve, and also assumes stable fuel prices and continued moderate growth in the global economy. "

Now there is the thing everyone is betting on stable fuel prices and growth. the 2 legged stool is a difficult balancing act. (sarc off)

Thu, 12/16/2010 - 09:07 | 811119 RobotTrader
RobotTrader's picture

Problem:

- FedEx misses

- RIG gets buried with an avalanche of lawsuits

Solution:

- Buy the U.S. Dollar

- Sell gold

- Buy BAC

Thu, 12/16/2010 - 09:16 | 811133 velobabe
velobabe's picture

hi RoBow, how is it hanging. when you surf the cold Pacific ocean does it shrink?

Thu, 12/16/2010 - 09:09 | 811120 Lets Hang Parliament
Lets Hang Parliament's picture

"The only question is whether, just like Cisco earlier, this surprising miss will be attributed to company specific factors." – And they seem to answer it…

“Our operating performance in the quarter was impacted by strong compensation and benefits headwinds”

Wazza problem? Am I missing something?

Thu, 12/16/2010 - 09:12 | 811126 fallingman
fallingman's picture

>> “Our operating performance in the quarter was impacted by strong compensation and benefits headwinds”

Good thing they don't have to pay the union wage like UPS ...

Thu, 12/16/2010 - 09:07 | 811121 prophet
prophet's picture

Odd how TIN collapsed yesterday. 

FDX estimates raised due to their new strategic plan to Absolutely Positively not ever need to hire another human.

 

Thu, 12/16/2010 - 09:19 | 811130 The Rock
The Rock's picture

Yeah, and they were just bragging how they had record volume flow in one day. What a setup. Take that H. Wanger!

Thu, 12/16/2010 - 09:21 | 811139 teotwawki
teotwawki's picture

Uh oh, what happened to "better than expected"?

Thu, 12/16/2010 - 09:20 | 811140 ziggy59
ziggy59's picture

Fed-up.  n'uff said

Thu, 12/16/2010 - 09:23 | 811144 HelluvaEngineer
HelluvaEngineer's picture

Surely this is a sign of growing local retail sales.

Thu, 12/16/2010 - 09:25 | 811145 Ferg .
Ferg .'s picture

Ah so that explains the futures dump around 40 minutes ago . Was wondering what the catalyst was .

Thu, 12/16/2010 - 09:34 | 811152 Cursive
Cursive's picture

They RAISED estimates?!

Thu, 12/16/2010 - 09:41 | 811164 ElvisDog
ElvisDog's picture

Two words - margin compression. Fifteen words - margin compression due to surging commodity prices that can't be passed on to the consumer.

Thu, 12/16/2010 - 10:21 | 811252 orangedrinkandchips
orangedrinkandchips's picture

yes indeed! Margin compression....Like AMZN and FDX...they can ship the entire world over...but they wont make any money BECUASE OF COSTS...margins are zip.

 

Amzn makes maybe...maybe 1B net rev a YEAR....the other fucks...they make 1-3B a QUARTER....

 

The consumer would just tell them to fuck off...

Thu, 12/16/2010 - 10:28 | 811262 firstdivision
firstdivision's picture

That is what I have been saying for a little bit now.  I have been waiting for this moment when margins get monkey hammered to the point of causing misses on expectations.  This is now when it will start unraveling again.  So expect QE3 announcement in about 2 months.

Thu, 12/16/2010 - 09:45 | 811170 jbc77
jbc77's picture

Futures still green. I'm blown away time and time again at this market. It should not surprise me one bit anymore. The heavy hitters are missing big and no market decline to acompany that. There should be no doubt that these markets are 100% manipulated.

Thu, 12/16/2010 - 09:50 | 811183 snowball777
snowball777's picture

Revenue up but net income down?

What's that stuff all the planes and trucks run on called?

Oh yeah, GAS!

 

 

Thu, 12/16/2010 - 09:57 | 811189 NOTW777
NOTW777's picture

so ZH is reduced to a yahoo level site, bashing single stocks to fit its agenda;  the earnings were not that bad. revenue was up and they raised guidance and they actually pay good benefits.

 

"shipments and yields grew in all transportation segments"

Thu, 12/16/2010 - 10:55 | 811334 snowball777
snowball777's picture

Benefits?! Then why are they fighting so hard to consider all their drivers contractors?

http://www.wcyb.com/money/26136653/detail.html

You're either a fool or a shill.

Thu, 12/16/2010 - 12:02 | 811531 NOTW777
NOTW777's picture

LOL - yeah, this is becoming yahoo, name calling and all.

BTW FDX is ripping upward

Thu, 12/16/2010 - 10:05 | 811220 Fearless Rick
Fearless Rick's picture

Futures are a set-up and indicative of just about nothing anymore. The markets have been setting up to roll over all week. Take a look at the new highs-lows spreads and the A-D line and you'll see my point. There have been more new highs than new lows practically every day since mid-May of '09. Now those numbers are compressing. A-D line has been negative every day this week and yesterday (Wednesday) was the worst, almost 2:1 decliners over advancers.

Simply put, what's holding this market up is options expiration on Friday and very low volume. That's about to change. Let's see what Robo and Wanger have to say about that analysis, OK, boys?

Thu, 12/16/2010 - 10:36 | 811279 b_thunder
b_thunder's picture

in the good ol' days this miss would easily "drop" FDX by 10-15%, maybe even 20%.  the FED is backstopping FedEx ...   ppl don't buy at BestBuy, evidently FedEx hopes they bought it all online and had it shipped...  we shall see

 

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