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Logistics Bellwether FedEx Misses Across The Board Despite Plunging Energy Costs
Remember the narrative that the plunge in gas prices is supposed to lead to a surge in corporate profitability if only for those companies for which energy is a cost (not a top-line item like in the decimated energy sector?). Moments ago logistics and trade bellwether came out with numbers that roundly refuted this, after it missed not only on the top line, with revenues of $11.94 billion on expectations of $11.98 billion, but a wide EPS miss, printing $2.14, well below the $2.25 expected and one which the company admitted includes the benefit of $0.16 in EPS from stock repurchases.
This is what the company had to say about its surprising across the board miss:
Operating income and margin increased primarily due to higher volumes and base yields in all three transportation segments. Results in the second quarter also included benefits from the company’s profit improvement programs, lower pension expense and a slightly positive net impact from fuel. These benefits were partially offset by higher aircraft maintenance expense due to the timing of aircraft maintenance events.
Revenue increased due to higher U.S. domestic package volume and international export package base revenue, partially offset by lower fuel surcharges and exchange rates. U.S. domestic package volume grew by 7%, including a 10% increase in U.S. overnight box. U.S. domestic revenue per package declined 2% due to decreased fuel surcharges and lower weight.
FedEx International Economy® volume grew 5%, while FedEx International Priority® volume increased 1%. International export revenue per package was flat, as higher rates were offset by unfavorable currency exchange and lower fuel surcharges.
But with gas prices seemingly sticky at these new low, low levels surely FedEx would at least boost its guidance as a result of lower costs, right? Wrong:
The company reaffirms its fiscal 2015 earnings forecast of $8.50 to $9.00 per diluted share. The outlook assumes continued moderate economic growth and a modest net benefit from fuel. The capital spending forecast for fiscal 2015 remains $4.2 billion.
And while we commend FedEx on posting revenue increases across its four key segments, including Express, Ground, Freight and Services, what was omitted is how FDX got there. A few things to note:
- Express Package Yield, aka Revenue per Package: down 2%
- Freight total average daily pounds: down 2%
- Revenue per US freight pound: down 2%
- Fedex Ground operating margin down from 15.4% to 15.2% despite a 25% drop in fuel operating expenses.
And so on. Judging by the plunge in the stock price, the market is starting to see through the "narrative"
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Sum Ting Wong
Despite Plunging Energy Costs
If you want your economy......you can keep your economy.
Paging Jimmy Carter.....please pick up the white courtesy phone.
Bad news is good news!! Set the printer to RAMMING SPEED!!!
"Freight total average daily pounds: down 2%"
Is that average total pounds shipped per day or average pounds per package shipped?
But either way it's saying to expect a 2% drop in GDP maybe?
Tylers: Any way to chart GDP versus total shipping weights for FedEx, UPS, USPS, etc like a domestic "Baltic Dry Index"?
And looks like USDJPY is ready to ship the bed:
http://www.marketwatch.com/investing/currency/USDJPY/charts?symb=USDJPY&...
They didn't miss littering up that hwy the other day.
Less shipping means just a little less for the Christmas thieves in my neighborhood to steal.
It might be part of the recognition among serfs that they don't have any money or they don't need any of this stuff???
Race
The answer to your question is both.
12% miss net of buy-back.
I hear shipments of care packages to Moscow are looking up, though.
Wait until Fedex has to pay misclassified Fedex ground employees back wages and benefits. http://www.forbes.com/sites/robertwood/2014/08/27/fedex-misclassified-dr...
The U.S. Supreme Court will probably have to decide this Labor Law case unless Fedex reads the writing on the wall, that litigation is now only delaying the inevitable. But Fedex doesn't settle. The cost to Fedex to pay back these newly classified Fedex employees will be in the hundreds of millions of dollars, real money.
And the killer line
oh give it a rest already...
here's the deal, especially for you ZH folks that don't live in the US...
on the US street, despite all the panic you see on this web site, *** nothing has changed and life continues on as normal ***
no one in the US is rushing to the furniture store to exchange dollars for Ikea furniture because we're worried it will take double the number of dollars to do that next week
gas prices are down and more beer money is in our pockets than before... this is good because, hey, beer money
people are still going to be able to get their kids G.I. Joe with the Kung Fu grip for Christmas, and they won't have to take out a second or third mortgage to do it
you can't throw a rock a block down the street without hitting a new car with temp tags on it... everyone and his brother has a new ride, it's almost comical
despite what some of the pathetic lying bullshitters are saying on this site (and you know who you are, just stay under your rock where you belong), people with good credit have NO PROBLEM WHATSOEVER getting loans, and at very good rates
our dollar is stronger and is up against every currency of importance year-to-date... expect to see more US tourists wandering your streets in the near future as a result
seriously, everyone thinks the US is going to topple over into blood & chaos any second now... could not be further from the truth
Damn straight post turd saver. With ten year liar loans you see Bimmers and Benzes popping up like mushrooms everywhere. Then again repos are at an all time high too. I hear banks have lowered standards for home mortages back to the swingin' pre 09s also. Let the good times roll!
You gotta be shipping me.
You shipped your pants??
Oh ship!!!
Yes, I shipped my pants!
(Great commercial. Too bad it was short-lived for obvious reasons.)
Reason being 'Mericans extremely short attention span?? Or "ship" innuendo?
No innuendo, it just sounds like shit:
https://www.youtube.com/watch?v=hL4lSavSepc
Whoops there goes another rubber tree plant.
This report doesn't look particularly bad for FedEx; but, yeah, it sort of disconfirms the low fuel prices = explosive growth meme.
All that low fuel prices means is that FedEx can fly half empty aircraft around cheaper now than otherwise.
yes its spelt R-E-C-O-V-E-R-Y
There is a recovery for uins, and a recovery for weins, and they aint the same recovery.
What is to become of the yoots?
Prolly gonna have to change thier name and become some kind of guard dog.
To be fair, oil costs won't factor yet.
But that's hardly relevant.
This shit is happening.
Looks like they overspent on king crab legs for Chuck Noland's coming home party.
We gonna beat your wang dang doodle all night long.
My personal EPS has gone up ~$40 a month due to fuel. We are reacquiring a taste for beef with these funds. Yes, an 7 pound roast per month.
Life is good./s
+1 for the WDD reference.
RIP Koko Taylor.
They built a Hub in Greensboro NC and it has been running at 20% capacity for going on 5 years.
Imagine the results if fuel costs HADN'T gone down.
You mean if energy prices didn't necessarily rise?
Not sure I want to go there.
Did they see any major impact from the lower fuel costs this quarter? I would imagine a large, bellweather company like FedEx to have hedged its fuel out for some period. Since the onset of major declines have been fairly recently, isn't there a chance they haven't seen much benefit from the reduction in fuel?
Edit: Didn't read far enough down...I see this issue on fuel hedging is already being discussed. Party on......
ignore this weak data, when they tell you to shop and buy, line up and do it..it's the american way.
but take this from one who knows many chinese, they know how to shop no wonder they are becoming the worlds economic enjine er engine..LOL
2-Day Priority Mail is now taking as long as 5-7 days if you live in a rural area far away from the major post office. The local carrier tells me the volume is astronomical. My guess is people are buying their gifts online so they dont even have to go to the store. Just tap a few buttons and charge it.
But with gas prices seemingly sticky at these new low, low levels surely FedEx would at least boost its guidance as a result of lower costs, right? Wrong:
Um ... wrong !!
FedEx hedges months in advance on their fuel costs and are very likely hedged at prices contracted back in April.
Airlines too, the consumer is always the sucker of last resort.
Exactly. So if or when they recontract at these prices and the prices go back up, they'll tack on a fuel surcharge to reflect the higher market and pocket these hedge savings.
The current reducsed energy prices wouldn't be something we'd see in this report but the next one.
I think they bought to much of their own stock....at too high a price...
Rookie mistake......probably only be a problem if things don't go well.
I said a few weeks back that this whole orchestrated OPEC oil collapse was likely the cover US politicians and the fed needed to really allow this to unravel. Why now? Well I think they saw the writing on the wall with Japan going nuclear, US holiday sales in the dump, and ultimately no rebound of global growth into next year. So they needed a scapegoat.
You can already point to two shocks---the US shale industry, and crisis in Russia---as the reasons "things began to fall apart". "QE and ZIRP, was working until....." Oh I can see it now.
They locked in great rates for gas 6 months ago and it is really paying off today. Same with UPS.
So we are seeing "package weight deflation"? Call Mr. Yellen - and the deflation fighters at the Fed!
Everything we see here pretty well spells it out...
R-E-C-E-S-S-i-O-N
THe only reason they are not whispering the word is the phony GDP numbers.
They also must prop the dead economy up for through the Christmas Season. After that another excuse will arrive.
And by the way, A HAPPY SEASON TO ONE AND ALL!
Just how strong is the floor under our feet? The American and world economy is in uncharted water and weird crosscurrents are clouding our economic future. Last quarter America's GDP came in at a strong 3.5% but the fact that a 10% jump in federal spending, mostly on Pentagon hardware bolstered growth and was very much behind the numbers. This "pre-election" spending was the biggest increase in federal spending since 2009 when the Obama administration put in place a huge economic stimulus package.
Mix in an upbeat November number concerning job creation, falling oil prices and ever higher stock market prices and new record highs and many people have the impression we are on a roll. The truth is if this market is as over extended and distorted as many people think a crash may occur at any time. The article below delves into some of the many crosscurrents at work that could bring the economy to an abrupt halt.
http://brucewilds.blogspot.com/2014/12/crosscurrents-cloud-future-economic.html
I own three small businesses, and all of them are up this year, and having a srong Q4. The businesses are unrelated to each other. I live in CA
Can you tell us if/how they hedged their fuel cost exposure?