newswor thy
FedEx, UPS issue
bullish forecasts; are
rate hikes ahead?
THESE ARE GOOD TIMES FOR THE DYNAMIC DUOPOLY OF THE
U.S. small-parcel industry.
Four days after UPS Inc. reported stellar second-quarter results,
FedEx Corp., UPS’s chief rival, announced on July 26 that per-share
earnings for its fiscal first quarter, which ends Aug. 31, would be well
above what it originally forecast and would come in between 81 percent and 116 percent ahead of the year-earlier period.
The Memphis-based giant said it expects earnings to be $1.05 to
$1.25 a share in the quarter; its earlier forecast was for earnings to
reach 85 cents to $1.05 per share. For its full fiscal year, FedEx expects
earnings per share of $4.60 to $5.20, up from a range of $4.40 to $5.00.
FedEx reported earnings of $3.76 per share in
its previous fiscal year.
“Our revenue and earnings growth are
exceeding original expectations, primarily
due to better-than-expected growth” in the
company’s air express and ground parcel volumes, said Alan B. Graf Jr., FedEx’s executive vice
president and chief financial officer, in a statement.
Graf said the company is benefiting from demand for its
international express and freight services. For example,
FedEx’s International Priority service, a time-sensitive
premium-priced product, grew 20 percent in the quarter, Graf said. FedEx will issue its official first-quarter
results on Sept. 16.
The FedEx announcement comes on the heels of UPS’s
report that its per-share earnings in the second quarter rose 71
percent over prior-year numbers. Second-quarter revenue for
the Atlanta-based company rose 13 percent year over year to $12.2 billion, resulting in a 57-percent increase in operating profit to $1.4 billion. Operating margins year over year rose by well over 30 percent,
the company said.
UPS spokesman Norman Black said the solid U.S. performance had
little to do with broad-based economic growth and was more the
result of the company’s strong execution and the lingering impact of
DHL Express’s January 2009 exit from the United States, which left
more traffic—and better pricing opportunities—for UPS and FedEx.
“We’ve been predicting a slow, sluggish recovery [in the United
States], and that’s what we’re seeing,” Black said.
Higher rates loom
Jon A. Langenfeld, transportation analyst for the Milwaukee investment firm Robert W. Baird & Co., said the performance of p. 14
APL Logistics chief sees
strength through peak season
The president of APL Logistics, countering
growing concerns over a possible second-half economic slowdown, said order flows
from overseas markets into the United States
are strengthening as the year progresses. The
3PL executive added that large U.S. retailers
see no slack in end demand through the
October–November period, at which time
traffic normally declines as retailers are fully
stocked in readiness for the holidays.
Separately, Jim McAdam told DC VELOCITY
that shipping giant APL, APL Logistics’ parent,
is developing a program to utilize 53-foot
ocean containers for intermodal movements
in the United States once the containers
arrive from Asia and are unloaded at their
U.S. ports of entry. APL said the program
would give shippers access to more domestic capacity and provide the company with
revenue freight on return trips, rather than
hauling the boxes back empty.
In November 2007, APL took delivery of the
industry’s first 53-foot seagoing container,
enabling shippers and importers to move
more cargo than they had in the 40-foot
boxes that had historically been used for
ocean voyages from Asia to the United States.
McAdam said APL Logistics is seeing a 25-
percent increase in import volumes from
major U.S. retailers compared to 2009 levels.
“What our customers are telling us is they
don’t see much of a slowdown” heading into
the holiday period, McAdam said.
If anything, the surge in demand is putting
pressure on APL Logistics to secure adequate
ocean liner capacity for customers, according to
McAdam. “Capacity is tight for everyone, and in
every market,” said McAdam, whose company
uses ocean carriage to move most of its customers’ freight. APL Logistics relies on its parent
for about half of its ocean capacity needs.
“The discourse has changed” from 2009,
McAdam said in an interview from the com-
pany’s Singapore headquarters. “Last year, it
was all about cost reductions. Now, it’s about
finding more space, more capacity.”
About 60 percent of APL Logistics’ revenue
comes from North America, McAdam said.
