Fuel costs, slowing demand hurt FedEx

FedEx had a fourth-quarter loss of $241 million and predicted a "very difficult" environment in the coming year. (Mannie Garcia/Bloomberg News)

FedEx Corp. posted its first quarterly loss in 11 years and projected earnings that fall short of analysts' estimates as fuel costs rise and a slowing economy curbs demand. The shares dropped 2.1 percent.

The second-largest US package shipping company had a fourth-quarter loss of $241 million on a write-down for its Kinko's unit, and predicted a "very difficult" environment in the coming year.

The report from FedEx, considered a proxy for the US economy, suggests fuel costs and declining demand will continue to erode prospects in industries ranging from shipping to airlines. Economists have cut their US growth forecasts for later this year and next as job losses, food, and fuel prices and tougher lending rules hurt consumers.

The loss was 78 cents a share, compared with a year-earlier profit of $610 million, or $1.96, the company said. Revenue rose 7.8 percent to $9.87 billion.

Excluding the $891 million charge for the Kinko's unit, which is being renamed FedEx Office, the company's profit was $1.45 a share, which missed the average $1.47 estimate of 11 analysts surveyed by Bloomberg. The write-down for FedEx Kinko's, a chain of office-supply and copy centers, was for the value of the trade name and goodwill.

FedEx said fiscal first-quarter earnings would be 80 cents to $1 a share, lower than the $1.34 average estimate of nine analysts surveyed by Bloomberg. Profit a year earlier was $1.58 a share. The Memphis-based company said earnings are "difficult to predict" because of volatile fuel prices and an "uncertain economic outlook."

The coming year will be "very difficult due to the weak US economy and extremely high fuel prices," FedEx chief financial officer Alan Graf said. (Bloomberg)

General Mills Inc. rose the most in 10 months in New York trading after the cereal maker reported fourth-quarter profit and sales that exceeded some analysts' estimates.

Revenue climbed the most since 2003 after the Minneapolis company increased prices and added marketing for Yoplait and Fiber One yogurts and lower-salt Progresso soups to counter rising grain and fuel expenses. Corn prices have surged 71 percent this year while oil has jumped 42 percent, resulting in higher costs to make and transport food.

Fourth-quarter sales climbed 13 percent. Profit excluding commodity trading rose to about 73 cents a share, General Mills said.

Thirteen analysts surveyed by Bloomberg estimated average earnings of 68 cents a share for the three months through May 25. Eleven predicted a sales gain of 7 percent. (Bloomberg)

Morgan Stanley said quarterly earnings dropped 57 percent on weak trading, investment losses, and a slowdown in investment banking, even after it realized $1.43 billion in one-time gains.

Morgan Stanley shares fell as much as 8 percent as investors questioned the quality of its earnings, which paled next to those of rival Goldman Sachs Group Inc., and after chief financial officer Colm Kelleher's cautious views.

"This has been an unusually stressed quarter," Kelleher told Reuters. "We were very troubled by what was happening. . . . We decided we would stay very conservative, strengthening our liquidity and capital positions."

Morgan Stanley, the second-largest US investment bank, reported income from continuing operations sank to $1.03 billion, or 95 cents a share, for its fiscal second quarter ended May 31, from $2.36 billion, or $2.45, a year earlier.

Net revenue dropped 38 percent to $6.51 billion, dragged lower by a failed contrarian bet on energy, a big write-down caused by a London trader who violated company policy, and write-downs on assets hurt by the credit crisis.

Meanwhile, most of the profits came from two one-time pretax gains: $698 million from the sale of its Spanish wealth management business, and $732 million from the sale of part of its stake in MSCI Inc The gains contributed 88 cents a share to earnings.

Some analysts said the investment bank's true earnings were just a few pennies per share, far short of average analyst expectations of 92 cents.

Gains from asset sales helped offset $245 million in severance related to job cuts, $436 million in losses from proprietary mortgage trades and $519 million in net losses on leveraged loans. (Reuters)