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Through the Fly's Eyes: FedEx
from Larry Ramer of Theflyonthewall.com
FedEx's Trucks are Slowing It Down
FedEx's (FDX) trucking business appears to be the main culprit that caused the company to reduce its 2007 guidance today.
The delivery company reduced its guidance for 2007 earnings to a range of between $6.70-$7.10, down from $7.00-$7.40 previously.
"The reason we took our range down was the freight market, not our company's performance," said FedEx CFO Alan Graf today on a conference call. FedEx has three truck lines, according to Bloomberg, and operating profit at the unit fell 30% in the company's Q1. American trucking businesses are taking hits as a result of weaker durable good and industrial production, triggered by the housing crisis, Graf explained.
By contrast, FedEx's core delivery business seems healthy, as operating margins in the company's FedEx Express and FedEx Ground segments actually increased in its Q1. The company's air freight business recorded a 9.35% jump in operating profit, although domestic delivery revenues inched down 0.8%.
Given the situation facing the company, it wouldn't be too surprising to see FedEx try to offload its trucking operations soon.
In any event, the picture painted by FedEx doesn't bode well for trucking companies like Universal Truckload Services (UACL) Oshkosh Truck (OSK), and JB Hunt Transport Services (JBHT). All three of those companies have price to earnings ratios around 18, and investors in all three may have to endure some nasty declines soon.
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Theflyonthewall.blog
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