"FedEx Profit More Than Doubles" -- Wall Street Journal
"FedEx Reports Profit That Trails Estimates ..." -- Bloomberg
Now hold up a sec, folks -- which is it? I know FedEx
Well let's see here. On the plus side, FedEx delivered exactly the kind of numbers it promised us when it gave us a "peek at its package" back in July. At $1.20 per share, earnings for fiscal Q1 2011 more than doubled the company's Q1 2010 performance, and arrived toward the high end of guidance (advantage, WSJ). Granted, these earnings fell short of Bloomberg's projected $1.21 per share profit -- but they nailed the consensus $1.20 number reported on Yahoo! Finance. It's kind of hard to fault FedEx for that, and a little unfair of Bloomberg to be assuming that its number was the number to beat.
"Improved global economic conditions" helped FedEx reap "higher volumes and better revenue per shipment" than last year. Revenue of $9.46 billion grew 18% year over year, and because with higher volumes come better utilization and greater "leverage," FedEx was able to add 270 basis points to its operating margin for the quarter, which now stands at 6.6%. Long story short, FedEx did everything it promised us last quarter.
But that's not the point.
The point is that FedEx then promptly proceeded to walk back expectations for this quarter. Things are still swell in the FedEx Express segment -- good enough that the company's going ahead with plans to buy new Boeing
You see, it seems Stifel Nicolaus was right when it warned us about price competition in less-than-truckload weight shipping back in May, and how this might hurt FedEx more than UPS
Moral of the story: Being a great player in a bad industry isn't always a good idea.
Fool contributor Rich Smith has no position in any stocks named above, but FedEx is a Motley Fool Stock Advisor recommendation, United Parcel Service is a Motley Fool Income Investor pick, and The Fool owns shares of them both. The Motley Fool has a disclosure policy.
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