Higher costs set to crimp FedEx profits next year

FEDEX reported a quarterly profit yesterday that beat analyst expectations, but said costs would constrain its 2011 earnings.

The company projected 2011 earnings per share in the range of $4.40 (£2.97) to $5.00.

“We expect the growth in earnings in fiscal 2011 to be constrained,” chief financial officer Alan Graf Jr said, citing increases in fixed pension and aircraft maintenance expenses, in addition to higher anticipated healthcare costs.

“The consensus is above the top end of that range,” BB&T analyst Kevin Sterling said of the outlook. “So that tells you that estimates need to come down. What’s constraining their earnings is their costs.”

For the fourth quarter that ended 31 May, Memphis-based FedEx posted earnings of $696m, or $1.33 per share, compared with a year-earlier loss of $849m, or $2.82 per share.

Analysts had expected earnings of $1.32 per share.

Revenue rose 20 per cent to $9.43bn as the global economy continued to recover.