FedEx boosts annual forecast amid strong start to holiday season

Bloomberg

FedEx Corp. raised its annual profit forecast, citing “solid demand trends” and a rebound from a June cyberattack at its TNT
Express unit in Europe.
The operator of the world’s largest cargo airline is on track for a record season of holiday deliveries, Chief Executive Officer Fred Smith said in a statement. Shipments to homes are increasing as more consumers shop online.
A robust start to the year’s busiest shipping season is crucial for FedEx and United Parcel Service Inc., which beef up manpower and equipment to meet swelling demand. E-commerce sales during the holidays this year are expected to increase as much as 15 percent over 2016, according to the National Retail Foundation.
“So far, it looks very strong, especially on the volume front,” said Logan Purk, an analyst at Edward Jones, referring to the holiday season. “It doesn’t look, expense-wise, like there’s anything outside of the ordinary, contrary to what we saw from UPS in the way of some service interruptions.”
FedEx climbed 1.4 percent to $245.85 after the close of regular trading in New York. FedEx advanced 30 percent this year, outpacing the 20 percent rise in the S&P 500 index and a 3.8 percent gain for UPS.
FedEx raised its full-year profit outlook to $12.70 to $13.30 a share, compared with the $12.47 average of analysts’ estimates. The Memphis, Tennessee-based company had lowered its forecast in September to no more than $12.80 a share, citing costs from the June cyberattack at its TNT Express unit in Europe.
If the Republican-backed US tax overhaul is enacted, adjusted earnings could increase by $4.40 to $5.50 a share in fiscal 2018, “primarily due to the revaluation of net deferred tax liabilities,” FedEx said.
Adjusted earnings rose to $3.18 a share in the fiscal second quarter, which ended on November 30. That surpassed the $2.88 average of analyst estimates compiled by Bloomberg.
Sales climbed 9 percent to $16.3 billion, compared with $15.7 billion expected by analysts.
Integrating TNT into the company’s broader operations will cost $1.4 billion, up from an earlier prediction of $800 million, FedEx said.
The courier is spending
more as it speeds up the process of folding TNT Express into its computer systems in the wake of the cyberattack.
About $450 million of the costs will be in the current fiscal year, FedEx said, and the two companies still should be fully meshed by the end of 2020. A loss of revenue and higher costs from the TNT intrusion reduced second-quarter profit by 31 cents a share, the company said.