Tuesday, September 22, 2009
So, What’d They Say?
So what, exactly, did FedEx say on the conference call last week?
Well, Fred Smith, the genius who started the whole thing, began the call with his standard overview of what’s happening and what he sees ahead.
In the previous quarter—ended in March—the best Smith could say was this (courtesy of the indispensible StreetEvents):
While the severe global recession continues to throttle somewhat FedEx's growth, we do see signs of stability as the rate of decline appears to have leveled off. In this regard, declines in FedEx Express International shipments appear to have bottomed and are at levels similar to last quarter. How long this bottoming out process will take and how strong the recovery will be remains of course uncertain. We believe however, the worst of the recession is likely behind us.
We remain optimistic about a turnaround beginning later in calendar 2009.
Three months later, the “bottoming out” and “rate of decline” has turned into something more positive:
Our financial performance was stronger than what we expected in June, thanks to a modestly improving global economy, strict cost management, and solid execution of our strategy. During the first quarter of FY '010, FedEx Ground and FedEx Freight noted positive month-over-month volume trends. Compared to the fourth quarter of fiscal year 2009, our International Priority volume at FedEx Express showed positive sequential trends.
These are encouraging signs of a more stable economy.
Still as many readers—particularly those who appear sat out the head-snapping stock market rally off the March lows—have pointed out in these virtual pages, champagne corks are not exactly blowing the lights out in Memphis.
Compared to last year, the numbers are still down—down $2 billion in revenue last quarter alone, thanks to the fact that volumes, while currently rising from the basement, have still not reached the ground floor yet, let alone the first or second floors.
And the business is still suffering from price declines “in a very competitive pricing environment.”
But FedEx was more willing this quarter than last to offer a view of the U.S., and it is one of recovery:
We are hopeful and confident as we move ahead. Forward-looking indicators such as new manufacturing orders, and the Conference Board's US leading economic index increased four consecutive months through July. In August, US factories saw their output rise for the first time since January 2008. At FedEx, we expect calendar third quarter GDP to grow about 3%, followed by roughly 4.9% growth in quarter four of calendar 2009. For calendar 2010, we believe US GDP will grow 2.9%.
More importantly, industrial production, a significant driver of FedEx's business, should improve more than 4% in 2010, a strong contrast to its 10% decline in 2009.
Here's hoping they're right.
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Posted by Jeff Matthews at 4:53 AM