DC Velocity - April 2011

newsworthy
FedEx issues bullish
Q4 outlook

FEDEX CORP. IN MID-MARCH RELEASED FISCAL THIRD-QUARTER results that were in line with expectations and issued a bullish outlook for its current quarter, a welcome tonic for global markets worried about issues ranging from the threat of nuclear catastrophe in Japan to elevated oil prices sparked by unrest in the Middle East and North Africa.

The Memphis-based giant reported revenue of $9.66 billion, up 11 per-
cent from the same period a year ago. Operating and net income declined
by 6 percent and 3 percent, respectively, reflecting the impact of higher fuel
prices and of severe winter storms
that reduced volumes and drove
up costs, the company said. The
company has levied higher fuel
surcharges to offset the higher
costs, but it often takes two to
three months for the surcharges’
impact to be felt in the results.
FedEx also said it absorbed
higher costs arising from the Jan.
30 integration of its two less-than-
truckload (LTL) units and the
reinstatement of merit pay
increases as well as higher pension
costs, among other expenses.

FedEx issued fiscal fourth-quarter earnings per share guidance of

$1.66 to $1.83 per share, compared with analysts’ consensus of $1.66 per share. Analysts say the projection is impressive given the lag time of the company’s fuel surcharge mechanisms. FedEx’s fiscal year ends on May 31.

BULLISH ON GLOBAL TRADE

Company executives were optimistic about global trade and shipping trends, while staying cautious about fuel prices and geopolitical unrest. The projected strength in its fiscal fourth-quarter results is largely dependent on a more well-behaved oil market, they said.

Executives were also upbeat on the outlook for rates, saying this is just the start of a multi-year trend in firmer pricing for its products and services.

“Continued growth in the global economy is driving solid revenue gains
in our transportation businesses,” said Frederick W. Smith, FedEx’s chair-
man, president, and CEO, in a statement. “We expect strong demand for our
services to boost our financial performance in our fourth quarter.”
In a subsequent conference call with analysts, Smith said the “dynamics of
global trade appear solid, although the impact of volatile fuel prices and
other global events remains uncertain.”
Both FedEx and its chief rival, UPS Inc., are considered proxies for the
U.S. and global economies due to their size and scope, as well as the p. 18

One of the largest distribution centers in the Southeast United States has changed owners.

US Industrial REIT III, an affiliate of the USAA Real Estate Co., has purchased a 124-acre, 1. 1 million-square-foot DC in Charleston, S.C., located about 25 miles from the Port of Charleston. The property was acquired from the Rockefeller Group and Mead Westvaco Corp., which developed the facility in 2009 as a joint venture. Terms of the transaction were not disclosed.

The DC already has a tenant. TBC Corp., which bills itself as the nation’s largest marketer of tires for the automotive replacement market, signed a deal in October 2009 to occupy the entire facility.

The DC is one of four proposed buildings that will eventually occupy 2. 7 million square feet of space off Interstate 26 along the Charleston Distribution Corridor.

Promoters of the Charleston logistics market tout it as an ideal distribution location situated halfway between New York and Miami, with excellent highway access and supported by an international airport and one of the largest deepwater ports in the region.

“Proximity to a growing major U.S. port will continue to attract cargo traffic and the need for quality distribution space,” said Pat Duncan, president and CEO of USAA Real Estate Co., in a statement announcing the deal. The transaction was made public in mid-February. ;