FedEx minimizes the impact of US-China trade on its business

David Koenig, Business Editor

updated

3:43 pm PDT Monday 17 September 2018

DALLAS (AP) – The leaders of FedEx Corp. Monday attempted to reassure investors that a growing trade war between the United States and China would have little direct impact on society.

The company said that only 2% of its revenue came from shipments between the United States and China, and that the rates announced so far covered less than 10% of these products. The Trump administration's tariffs on $ 200 billion of Chinese imports would raise that percentage to one-quarter of the 2 per cent.

The potential for more tariffs "is affecting the market and we are starting to see some of the economic activity in China begin to moderate," said Executive Vice President Rajesh Subramaniam during a conference call results.

Smith called the trade dispute a concern.

"The story is very clear: the countries seeking the most open market are the ones that thrive the most and whose citizens' income increases the most," he said. "History shows that people want to travel and trade."

FedEx announced earnings of $ 835 million for the quarter ended August 31, an increase of 40% over last year. The Memphis, Tennessee-based company has been spurred by the growth of the economy, lower taxes and changing habits of US consumers, who buy more products online than ever before.

Nevertheless, the results were below Wall Street expectations, and FedEx shares fell in after-hours trading.

FedEx and its competitor United Parcel Service Inc. enjoy strong pricing power as online shopping continues to thrive. Some analysts predict that rising global demand, as well as consumer expectations for fast delivery of their online purchases, will help the company move towards the crucial Christmas shopping period.

Adjustment result of $ 3.46 per share, excluding the cost of the combination of the Dutch TNT Express acquisition in its own operations – significant costs that FedEx plans to continue "in the next few years. years. "

Analysts expected an adjusted profit of $ 3.78 per share, according to a survey conducted by Zacks Investment Research with 11 analysts.

Daniel Sherman, an analyst at Edward Jones, said Wall Street underestimated FedEx's increase in employee compensation spending following the adoption of the Corporate Tax Rate Reduction Act.

"You end up with very strong underlying earnings growth," Sherman said. "Business is still strong."

FedEx reported a profit of 50 cents a share on lower corporate tax rates that President Donald Trump enacted in December.

Revenue was $ 17.05 billion, exceeding expectations of $ 16.88 billion.

The company has raised its profit forecast for the current year, which runs until next May, by 20 cents per share, from $ 17.20 to $ 17.80 per share. Before the report, analysts surveyed by FactSet were expecting $ 17.38.

FedEx shares rose 29 cents to $ 255.73. In after-hours trading, they were down $ 6.93, or 2.7%, to $ 248.80.

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David Koenig can be contacted at http://twitter.com/airlinewriter