FedEx profits fall on weak results

Global package delivery giant FedEx Wednesday reported lower quarterly earnings and slashed its profit guidance for fiscal 2013, citing weakness in the international freight market. FedEx, considered a proxy for the global economy, reported net income of $361 million for the third quarter that ended February 28, down 31 percent from the year-ago period. Revenue rose 4 percent to $11 billion, about $100 million below the company's forecast. FedEx, which plans to remove some aircraft capacity and reduce headcount as part of a restructuring, said competition remained tough for premium international deliveries. "The third quarter was very challenging due to continued weakness in international air freight markets, pressure on yields due to industry overcapacity and customers selecting less expensive and slower-transit services," said chief executive Frederick Smith. FedEx Express president David Bronczek told analysts during a conference call that the company's US business was performing "very well." All segments of the US delivery recorded flat or positive margin growth compared with last year. To compensate for the slower international side of the business, FedEx plans to decrease capacity to and from Asia. The company slashed its capital spending for fiscal 2013 to $3.6 billion from a previous forecast of $3.9 billion. FedEx also is proceeding with a voluntary buyout program that targets thousands of employees, with most of the buyouts to take effect in the current fourth quarter that ends May 31. It estimates the program costs will come in at $450-$550 million for the year. FedEx is projecting "modest" growth in the US and global economy, said executive vice president Mike Glenn. The calender outlook "certainly remains uncertain, due mainly to policy issues in the US, Europe and China," Glenn said. FedEx shares were off 5.8 percent in midday trade in New York.