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Global Trade Bellwether FedEx Misses, Cuts Outlook, Blames Weak Industry Demand, Higher Wages
Every quarter we pay particular interest to the results reported by Fedex not only due to its position as the leading company in worldwide logistics but due to its status as a bellwether in global trade. And not surprisingly, following a bevy of reports here and elsewhere confirming the plunge in global trade, Fedex did not disappoint, or rather it did when it reported non-GAAP EPS of $2.42 (which included one extra day att the company's operating segments) missing already reduced consensus expectations of $2.45, but it also cut its full year 2016 EPS guidance from $10.60-$11.10 to $10.40-$10.90 (below the consensus $10.83) proving yet again that hopes for EPS growth are just as misplaced as those for multiple expansion at a time when the Fed is preparing to hike rates and as China unleashes Quantitative Tightening.
Specifically, the company announced that a boost in operating income at FedEx Express "were partially offset by higher incentive compensation accruals, higher self-insurance reserves and operating costs at FedEx Ground, and lower-than-anticipated volume at FedEx Freight. Fuel had a slightly negative net impact to operating income."
At Express, FedEx managed to grow operating income by 45% even as revenues dropped 4% Y/Y to $6.59 billion "as lower fuel surcharges and unfavorable currency exchange rates more than offset improved base rates. U.S. domestic package volume grew by 1%, driven by growth in deferred box and overnight envelope. U.S. domestic revenue per package decreased 3% due to lower fuel surcharges, partially offset by strong base rates."
If Express saw a rebound in profits despite a rise in revenues, the company's Ground segment did the opposite with operating income declining 1% to $537 million "as lower fuel surcharges and unfavorable currency exchange rates more than offset improved base rates. U.S. domestic package volume grew by 1%, driven by growth in deferred box and overnight envelope. U.S. domestic revenue per package decreased 3% due to lower fuel surcharges, partially offset by strong base rates."
But the biggest disappointment was FedEx Freight where revenue was virtually unchanged, yet where operating income tumbled 21% as Less-than-truckload (LTL) average daily shipments declined 1% with the company blaming "weak industry demand". LTL revenue per shipment was down 1% as higher rates from yield initiatives were more than offset by lower fuel surcharges. Operating results declined primarily due to salaries and employee benefits expense outpacing lower-than-anticipated volume.
Perhaps now it is time to trim those record S&P margin forecasts?
So with much of the company's pain due to underprovisioning for fuel surcharges, which was surprising considering the global plunge in gas prices, the company announced that it will "increase shipping rates by an average of 4.9% effective January 4, 2016. FedEx is also increasing surcharges for FedEx Ground shipments that exceed the published maximum weight or dimensional limits, and updating certain fuel surcharge tables at FedEx Express and FedEx Ground effective November 2, 2015."
Finally, it appears not even the company is confident it can execute as the world slows down, and as a resultt it aggressively cut its forecast:
FedEx now projects adjusted earnings for fiscal 2016 to be $10.40 to $10.90 per diluted share before year-end mark-to-market pension accounting adjustments, aided by benefits from the profit improvement program. The outlook assumes moderate economic growth and does not include any operating results or costs related to TNT Express. The capital spending forecast for the fiscal year remains $4.6 billion.
“Our new fiscal 2016 outlook is modestly lower than our initial forecast due primarily to weaker LTL industry demand and higher than expected self-insurance reserves and operating costs at FedEx Ground,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “We still expect strong earnings growth this year, as we remain focused on executing our profit improvement program, leveraging e-commerce growth and enhancing our revenue quality.
Good luck with passing those costs through in a environment of weak demand and the assumption of "moderate economic growth" especially as the Fed begins to hike.
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It's all going down................................Hill ................rather fast
This makes sense given the Baltic Dry Index is in the crapper -- air freight should be as well.
They're great at delivering phyzz though...always get it on time.
Maybe they should change their name from FedEx to something else. No faith anymore in anything named "Fed". They're about as Federal as the Federal Reserve is...and vice versa.
Maybe they should be named "Kicking the USPS's ASS on a Daily Basis and Not Costing the Tax Payers Billions of Dollars a Year" Express.
Secession Express?
QE light or consequences bitches, you're out of options except for the hope that lying will still work.
Anyone heard anything about this yet???? Sure seems to have gone under the radar.
http://www.cbc.ca/news/canada/montreal/silver-heist-montreal-shipping-co...
16 tons of silver stolen in Montreal.
The police have already arrested a few people and recovered about 1/3 of the silver.
Edit: I thought I read that somewhere but I can't find it so maybe I'm wrong and the silver is under my bed, I mean missing.
You load Sixteen tons, whaddya get...
Of course, as usual too high regular employee wages, what about management and executive wages ranging on the n*(10..100)/1 YO MOTHERFUCKERS ?!?!?!
Non GAAP?
Who gives a flying flip about Non GAAP.
Quaint? Piss on'em.
Blames Weak Industry Demand, Higher Wages
A snowstorm......a terrible flood!
Maybe we should QE the 94 MillionTM?
If wages are a problem, Fredrick Smith is always welcome to take a pay cut and performance bonus cut.
But...but....but......how would the pleebes manage without multiple layers of beaurocracy and thousands of pages of process and procedures?
....do I really need the /s
Look, I'm already buying as much shit off Amazon as I can. My garage is stuffed to the rafters with empty cardboard boxes. I don't know how much more I can do by myself to improve the situation for shipping companies.
@NoDebt
FILL those empty cardboard boxes..............it's your Duty
You've got empty cardboard boxes.....you're in luck.....we've got widgets!
We're "shovel ready".....and we don't even need the damn shovels.
If he was really interested in helping the economy he'd start shipping empty boxes to..........well anywhere!
If you live in the south you could ship some humidity out west where they desperately need any extra moisture they can get.
Stick a free Solyndra solar panel part in there......tell them it was stolen.
They'll come a running.
Mine are New Egg boxes.
Amazon is the worst company to give your business to IMHO.
Yup. They used to be good. Those days are gon.
Add to that BNSF and UP, I have two friends at each rail company and they said their loads are down by nearly 50% this year. Hmmm, add to that this FedEx number and that is what investors should be looking at.
BTFD the DOW is headed to 20K. LOL
If Fedex can't get their Chinese style numbers (aka NonGAAP - NOT Generally Accepted Accounting Posturing) to hit their own guidance, well to borrow an earlier ZH poster's comment:
The Star Trek analogy: We are losing our shields captain!
captain................ Scotty...........................has run out of thrust!
So with much of the company's pain due to underprovisioning for fuel surcharges, which was surprising considering the global plunge in gas prices, the company announced that it will "increase shipping rates by an average of 4.9% effective January 4, 2016...
GOOD LUCK WITH THAT SHIT BITCHEZ.
They raise rates about 5% every single year
Once the war starts everything will be better!
Wait, you mean the the geniuses running the show really can't create demand from thin air? Wait, then all they did was pull future demand forward in order to make the current environment look better?
So that means we are dealing with some big holes in demand that were pulled forward a few years ago?? Wow, who could have predicted that? Never fear, they have a solution for this too!
Not sure if it works for average folk, but I think it involves millions of immigrants, a war or two, and economic collapse, and lots and lots of butthurt for all the lilttle people.
Isn't tyranny fun!!
Only if you're the one running this little shit show.
Ja Yellen?
Yea "shit show" is a perfect description.
I just wonder what the original plan was/is, and how far we have deviated from their grand scheme by this point? Obviously we were all fucked from the get-go, but HOW the fuckfest actually goes down is never 100% according to any plan.
(FedX) + (Fed) = DOW20k
wait don't they ship Iphones?? why millions are needed in china alone..get a contract with apple quick.
b bu butt shipping is "free". When you go to check out on Amazon and other online businesses it says it right there on the page. Free shipping! LMAO
Shpping costs have become re-fucking-diculous in the past few years!
They can "pass" their rate increases right their ass as far as I am concrened.
Now go tell your sad story to someone else fedex and fuck off!
I'm still paying a fuel surcharge from some companies, that they put on in 08. The only thing I have learned by calling, is what a blank stare sounds like on the phone.
They are not cheap down here in Colombia..its $45 to send a letter to the USA....but the are a bellweather....we are slowing down...
How do you like Columbia?
Watch Fedex closely.
2015 was the year Fedex ruined their image with customers.
Fedex made a massive increase in their rates, introducing "DIM Rates" (charging on box size not weight) which may sound innocuous but most small shippers saw rates go up 20-30%.
Angry customers fled and immediately went to USPS both for better rates and to spite Fedex.
Also high increase in retail rates at local Fedex stores. If you don't already have a Fedex account, rates from what i can tell nearly doubled at the local stores. Just stupid increases.
UPS followed Fedex and raised raised raised rates.
Fedex said all the new money from DIM rates would pay for more hubs and expanded facilities.
This guy just wrote an article about it but I think he misses the mark and understates it
http://www.joc.com/international-logistics/impact-dimensional-weight-pri...
USPS is now using dim weight as well - their rates are similar to FedEx and UPS now.
USPS Flat rate boxes / no DIM
USPS region boxes / no DIM
Boxes that weigh 45lbs and cost 28.00 to ship, they are now putting a 55.00 oversize charge on. Also if the trailer is not full it sits on the dock till the next day. Is happening more and more and if you call they say they can't afford to run half full trailers, even if it is a next day route
I see a merger coming.....FED EX and UPS......FEDUP
Fedx fucking sucks!!!! They use contract drivers, sometimes showing up in shitty vehicles, have thrown shit out on my porch and broke it, have complained about having to come to my rural house, have called me and have me meet them 20 miles away at the gas station because they are lost, etc etc etc.
Not one problem with UPS, it's well worth the extra money to avoid all of these hassles.
What I really hate is buying shit off the net that doesn't give me a choice of NOT using Fedex.
would have thought paying people lower wages and Zero percent for their money would have something to do with it
Federal Express, that's a part of the Federal government like the Federal Reserve, right?
It must be because, well like - you know, it says 'Federal'... Now if you don't mind, I have an NFL game to watch...
Not many cargo planes full of rubber dogshit flying out of Hong Kong these days.
Not many cargo planes full of rubber dogshit flying out of Hong Kong these days.
Weak consumer demand because of inflation and job losses.
The deception continues.
Don't expect good news from Walmart.