Late Tuesday, FedEx (NYSE:FDX) announced its earnings for the most recent quarter will be negatively impacted due to the global slowdown taking place. It is the latest sign that the world is in contraction mode.
The world’s largest air-cargo shipper by revenue said earnings for the August ended quarter will come in below already reduced expectations. FedEx now expects earnings to be in the range of $1.37 to $1.43 per diluted share, compared to $1.46 per diluted share a year earlier. The company’s original forecast was for earnings of $1.45 to $1.60 per diluted share. Additional information will be available on September 18, 2012, when FedEx releases its full earnings report and conducts its conference call.
“It looks bad,” said David Vernon, an analyst at Sanford C. Bernstein & Co. He said the global economy has decelerated faster than even FedEx anticipated, according to the WSJ. Earlier this summer, FedEx reported a decline in fiscal fourth quarter profit and a dip in full-year cargo volume growth for the first time in over two years.
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Shipping various goods across the world for many industries, FedEx is often viewed as an economic bellwether. The company’s announcement echoes recent economic reports. The Institute for Supply Management’s factory index fell to 49.6 in August, representing a decline in U.S. manufacturing for the third consecutive month. It is the longest losing streak since the recession supposedly ended in 2009. Manufacturing activity in the eurozone also fell for the 13th month. Meanwhile, China, the world’s second largest economy, reported last weekend that its manufacturing activity dropped to a nine-month low.
Shares of FedEx dropped nearly 3 percent in morning trading, while United Parcel Service (NYSE:UPS) fell 2.2 percent. Amazon (NASDAQ:AMZN) shares also edged lower as some fear the world’s largest online retailer is partly responsible for the decline in shipping. The recent flood of dismal manufacturing data also sent Caterpillar (NYSE:CAT) shares more than 3 percent lower on Tuesday, making it the worst performing Dow Jones Industrial Average component.
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