By Nick Carey
CHICAGO (Reuters) - Package delivery company FedEx Corp (N:FDX) posted a higher quarterly profit on Wednesday, but missed Wall Street expectations due to weak global economic conditions and the strong U.S. dollar.
The Memphis-based company also lowered its full-year earnings forecast, citing modest economic growth and higher-than-expected operating costs plus self-insurance reserves at its ground domestic U.S. package unit. It also sees weaker demand for its less-than-truckload business, in which operators fill trucks with smaller orders from multiple customers as opposed to regular trucking firms that haul full loads for single customers.
The news sent FedEx shares down more than 2 percent.
Often considered a bellwether of U.S. economic activity, FedEx said it now expects earnings per share for the fiscal 2016 year ending May 31 next year in a range from $10.40 to $10.90 before year-end mark-to-market pension accounting adjustments. The company had previously forecast full-year earnings per share of $10.60 to $11.10.
Analysts have on average predicted full-year earnings per share of $10.82.
"We remain focused on executing our profit improvement program, leveraging e-commerce growth and enhancing our revenue quality," Chief Financial Officer Alan Graf said in a statement.
FedEx reported a net profit for its fiscal 2016 first quarter ending Aug. 31 of $692 million or $2.42 per share, up 6 percent from $653 million or $2.26 per share a year earlier.
Analysts had on average expected earnings per share of $2.46.
FedEx said its U.S. domestic package business revenue rose 29 percent, but freight unit revenue was flat and was down 4 percent in its international package unit due to the strong U.S. dollar and lower fuel surcharge revenue.
The company reported revenue for the quarter of $12.3 billion versus $11.7 billion a year earlier, in line with analyst estimates.
FedEx said its planned fiscal 2016 capital expenditures remain unchanged at $4.6 billion. The company said it expects the U.S. economy to grow 2.5 percent this year and 2.8 percent in 2016, led by consumer spending.
Executives said on a conference call with analysts FedEx expects a record peak holiday season this year and will hire up to 55,000 seasonal workers. Last year the company said it would hire up to 50,000 workers for the peak season.
On Tuesday, main rival United Parcel Service Inc (N:UPS) said it would hire up to 95,000 workers to handle the holiday surge in packages.
In early trading, FedEx shares were down 2.6 percent at $149.86.