FedEx's profit disappointed Wall Street. And the package delivery company, a proxy for the U.S. economy, trimmed its fiscal year earnings forecast. Fred Katayama reports.
FedEx's quarterly earnings reflected a weaker economy. The package delivery company's profit rose but disappointed Wall Street. FedEx, seen as a proxy for the U.S. economy, said economic conditions were "weaker than expected," especially in the manufacturing and global trade sectors. The drop in oil prices translated into lower fuel surcharges the company could assess its customers. That, along with a stronger dollar, hurt revenue at its key business, express delivery. Cowen analyst Helane Becker said, "FedEx's results were negatively impacted by higher than expected costs in the Ground segment and softening demand for Freight services." She was referring to the high costs of handling larger packages, which pushed down operating income. The road ahead may be bumpy. FedEx cut its earnings forecast for the fiscal year citing weak demand in its freight business and higher operating costs in its ground business. FedEx shares, down 11 percent this year, dropped further in early trading. The company said Tuesday it plans to hike shipping rates by an average of roughly 5 percent effective January. And it'll boost surcharges for certain packages.