FedEx Reports Earnings Boost Due to Lower Fuel Prices

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Northern Arizona, USA: A heavy-duty FedEx tractor-trailer rig hauls two trailers full of parcels on interstate I-40 between California and New Mexico
Northern Arizona, USA: A heavy-duty FedEx tractor-trailer rig hauls two trailers full of parcels on interstate I-40 between California and New Mexico

Thanks to a nice combination of milder weather and lower fuel prices, package delivery giant FedEx Corporation (NYSE:FDX) beat market expectations. Its quarterly net profit earnings report caught many analysts by surprise. This may boost FedEx’s stock price. However, there is a bit of a black cloud in the horizon. The company is also forecasting that its year-on-year earnings numbers would fall below analysts’ estimates. The culprit? It is not the US economy. The US economy is roaring along quite well, thank you. The problem is the rest of the world.

Global economic growth has been quite cool and this is sure to weigh down on FedEx. FedEx, after all, is not just a US parcel giant, but a global player as well. A large chunk of its revenues comes from international operations, and a slowdown in both Chinese exports and Chinese imports in particular is sure to weigh on the company’s earnings figures. A key driver to its profits is the fact that its expenses didn’t rise as fast as it normally would rise. Why? It’s because of the depressed price of crude oil.

As oil prices remain depressed, expect FedEx costs to remain low, and this can lead to higher profits. All told, FedEx reported third quarter net profits of $580 million, which amounts to $2.01 per share. This is a 53% improvement from the previous year’s quarter of $378 million, or $1.23 per share. FedEx’s third quarter numbers blew away consensus analyst expectations of $1.87 per share.

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