FedEx, in wake of UPS warning, reaffirms its fiscal 2015 guidance

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UPS shares plunged Friday after the company warned profits for the fourth quarter would come in well less than Wall Street expected.

But its competitor FedEx reaffirmed its fiscal 2015 outlook a couple of hours later, saying it expected continued economic growth and cheap fuel. FedEx shares fell 2 percent, while UPS shares fell 10 percent.

UPS forecast adjusted earnings of $1.25 per share for the fourth quarter. The 25 analysts polled by Thomson Reuters on average expected earnings per share of $1.47; the most pessimistic estimate was $1.44.

In a statement, UPS CEO David Abney described the company’s fourth-quarter performance as “disappointing.” The parcel service said package volume and revenue were as expected, but operating costs were higher than it forecast.

UPS said it made plans to accommodate peaks in demand, but demand was lower than expected on most days. The company also cited falling productivity, overtime and training costs and the West Coast port dispute as contributing to the added expenses.

The company also said 2015 EPS growth would be slightly less than its long-term growth target, which is 9 percent to 13 percent.

Analysts had expected fiscal 2015 earnings to grow almost 14 percent compared to fiscal 2014.

“UPS is in the early stages of a multi-year initiative to adapt our operations to these market challenges. We are making progress, but this quarter reflects that more work needs to be done,” CFO Kurt Kuehn said in a statement.

FedEx, in a brief statement, stood by its fiscal 2015 forecast for earnings of $8.50 to $9 per share. Analysts expected earnings of $8.97 for the year.

The company said its forecast assumed “continued moderate economic growth” and a “modest net benefit” from fuel costs.

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