FedEx Corp said on Wednesday it was cutting its capacity between the United States and Asia, sending its shares lower on concerns about future growth, even as the world's biggest air-freight company posted a stronger-than-expected profit.
The company, considered an economic bellwether because of the massive volume of goods it moves around the world, is still trying to adjust to increasing demand for cheaper ground transport rather than pricier but faster air shipping.
FedEx reported net income of $303 million, or 95 cents a share, for the fourth quarter ended May 31, compared with $550 million, or $1.73 a share, a year earlier.
Excluding costs of a business realignment program and aircraft impairment charges, the company earned $2.13 a share. Analysts on average were expecting $1.96, according to Thomson Reuters I/B/E/S.
"Our profit improvement program is progressing, but we continue to see the effects of customers selecting lower-rate international services," Chief Financial Officer Alan B. Graf, Jr. said. "FedEx Express will further decrease capacity between Asia and the United States in July."
The company said earlier this month that it would permanently retire or will speed up the retirement of 86 aircraft and more than 300 engines as it modernizes its fleet. It is also increasing rates for its FedEx Freight subsidiary by an average of 4.5 percent, effective July 1.
Revenue for the quarter came in at $11.4 billion, slightly above last year's $11 billion.
Revenue for FedEx's ground segment, which has been a strong performer, was $2.78 billion, up 12 percent from last year.
FedEx Ground's average daily volume grew 10 percent in the fourth quarter driven by market share gains and growth in e-commerce.
FedEx forecast earnings growth of 7 percent to 13 percent, excluding special items, for its new fiscal year, assuming U.S. gross domestic product growth of 2.3 percent, world GDP growth of 2.7 percent and the current outlook for fuel prices.
Shares of the Memphis, Tennessee-based company were down 0.7 percent at $98.75 in trading before the market opened.
(Reporting by Nivedita Bhattacharjee in Chicago; Editing by Gerald E. McCormick and Lisa Von Ahn)