FedEx Corp. (NYSE:FDX) today announced that it was cutting its projection of growth based on a poorer than hoped world wide economic performance. The company is able to approximate international growth based on its transport worldwide of thousands of different good. The projection was released along with it’s earnings forecast for the next quarter which ends in May. The company has experienced problems of its own recently. The figures it released today caused a drop of over 4% in its share price based on its projections.
The projection that the world economy won’t grow quite as fast as expected stem from several factors, chief among these are Europe’s fiscal and economic troubles. The beleaguered continent has yet to put behind it the debt crises which plagued it last year. After a second Greek bailout and a forthcoming treaty on fiscal restrictions the EU has yet to start a secure recovery. FedEx blames that along with the rise in the price of oil for its own troubles and the international state. The company’s forecast for the world had been 2.9% growth, but as circumstances shifted that has been cut to 2.3%. The tighter economic circumstances may be loosened if the US recovery picks up. Such a result would increase aggregate demand and help China’s factories and Europe as a whole grow on exports.
The company’s earnings forecast disappointed as would be expected under less than projected economic conditions. Its position as the world’s number premiere air cargo carrier make it extremely susceptible to changes in global activity. The firm projected that it would have earnings per share of $1.75 to $2 this quarter while. Analysts had previously projected earnings per share of around $1.98 at the higher end of FedEx’s own. There has been some good news for the company however. When compared to this time last year they are doing particularly well. Their Net Income has more than doubled, now standing at $561 million, while their revenues increased to around $10.6 billion.
The company will continue to be hit by high gas prices as problems in the Middle East continue. Happenings there are difficult to predict, though recent reports suggest Libya may be able to increase output to off put the upward pressure on prices. FedEx said they are considering grounding some of their aircraft in order to cut costs in the US.