FedEx swings to 4Q loss; guidance disappoints

FedEx, considered a bellwether for the broader U.S. economy, predicted 2009 earnings of $4.75 to $5.25 per share, well below Wall Street expectations of $5.92 a share. The international package delivery company expects to earn 80 cents to $1 per share in the first-quarter of the current fiscal year. Analysts forecast $1.27 per share.

"Looking ahead to '09, we do expect conditions to remain extremely challenging and we anticipate in both the first quarter guidance and the yearly target the current economic weakness will continue and the current level of fuel costs will not mitigate," chief financial officer Alan Graf said in a conference call with market analysts.

FedEx posted a loss for the just-ended fourth period of 78 cents a share, or $241 million, compared with a profit of $610 million, or $1.96 per share, for the same quarter last year.

Excluding one-time charges, FedEx earned $1.45 per share for the fourth quarter. Revenue rose 8 percent to $9.87 billion from $9.15 billion a year earlier.

Analysts polled by Thomson Financial expected $1.47 per share on revenue of $9.6 billion.

FedEx, which owns the world's largest cargo airline, spend almost $1.4 billion on fuel in the fourth quarter and those costs represented 14 percent of total operating expenses, said Edward Jones analyst Dan Ortwerth.

FedEx customers pay fuel surcharges, but that does not cover all of the increases. The company's fuel costs for the quarter were 54 percent higher than for the same period last year, Ortwerth said, while the surcharges were up less than 30 percent.

"They don't try to recover the entire increase in fuel because that would really hurt the customer and they have the sense to invest in long-term customer relations," he said.

But higher costs for fuel mean higher prices for FedEx services.