Facing much higher costs despite transporting millions of packages during this past holiday season, FedEx missed expectations on Wall Street Tuesday for the quarter just ended.
The three-month period included the majority of the 2016 holiday shopping and shipping season that included projected record setting days during December. Coming through at that time, which is a critical time for the company, CEO at FedEx Frederick Smith was pleased.
However, analysts said that the company faced infrastructure and fuel costs that that were higher. An industry research company said that despite having growing pains due to the continual growth in e-commerce, the company is likely to prosper during the upcoming year.
During the just ended quarter that ran through the end of February, FedEx’s adjusted earnings were $638 million equal to $2.35 per share.
That was down close from $692 million equal to $2.51 per share last year during the same period. The result was a drop of 8%. It was also below the per share earnings of $2.63 projected by analysts. Adjustments to earnings included the integration expenses for TNT Express.
However, FedEx non-adjusted earnings were 12.5% higher this year compared to last during the same three-month period, coming in at $2.07 per share compared to $1.84 per share.
FedEx maintained profit guidance from before for the complete year at between $11.85 and $12.35 per diluted share. Analysts on Wall Street estimated earnings for the full year to be $11.99 per share for its fiscal year that ends on May 31.
The package shipping company has targeted operating income improvement at its FedEx Express unit to $1.5 billion from $1.2 billion for its fiscal 2020 versus fiscal 2017. That assumes economic growth will be moderate and current tax and accounting rules.
Over the next three years, its benefits of TNT Express, another worldwide package delivery service, and its modernization of FedEx will begin to payoff, said CFO at FedEx Alan Graf Jr.
The shipping business had become very competitive over the past few years with FedEx and UPS fighting for market share worldwide due to the tremendous growth in e-commerce causing many more packages to be shipped each year.
Amazon the behemoth of e-commerce has also started to ship some of its own packages through a shipping company it has established in the U.S., which adds even more to the competitiveness in the industry.