Economic bellwether FedEx reported better than expected earnings this morning.  They cited strong holiday sales and continuing global economic growth as the primary drivers.  On the conference call they said they expect 2.2% U.S. GDP growth in 2012 and 2.9% global growth.  This is based on strong expectations for growth in emerging markets.  They reaffirmed their full year guidance on “moderate” economic growth:

“FedEx projects earnings to be $1.25 to $1.45 per diluted share in the third quarter and reconfirms its forecast of $6.25 to $6.75 per diluted share for fiscal 2012. This guidance assumes the current market outlook for fuel prices, normal winter weather and moderate growth in the global economy. The company reported earnings of $0.73 per diluted share in last year’s third quarter, which included one-time FedEx Freight combination costs of $0.08 per diluted share. The capital spending forecast for fiscal 2012 remains $4.2 billion.”

Their operating stats give us a decent look into the state of the global economy.  Average daily freight pounds of 2% for the quarter and 1% for the six month period is consistent with the data we’ve been seeing in general from other segments of the economy – growth, but meager:

It’s not a great report, but let’s remember not to blow things out of proportion.  The global economy has faced enormous headwinds in 2011 and things aren’t falling apart.


Got a comment or question about this post? Feel free to use the Ask Cullen section, leave a comment in the forum or send me a message on Twitter.

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Jay

    CR, I think you meant to say

    “The global economy has faced enormous headwinds in 2011 and things aren’t falling apart”…YET.

  • Pierce Inverarity

    Cullen, what’s your take on Mosler’s view of the ECB bond buying?

  • Work

    CR, curious if your model has given its own rendition of a Santa Claus rally? Or is it still in sales mode?

  • http://. Octavio Richetta

    Work, do you want an A+ answer to your question? READ THS! This is THE BEST analysis of the EU crisis from an investing point of view I have read todate. As I have said many times, you are now starting to see people saying this is worse than 2008. My words here:


    So this is NO JOKE, this is a PERFECT STORM and the lobster boat has already been lost (did anyone read the book? Lobster boat sailing out of Gloucester; I lived and sailed a 40 ft sloop not too far from there) I hope Cullen posts this “one of a kind” interview.

  • El Viejo
  • http://. Octavio Richetta

    Now, this is not me , crazy retired Professor posting from Argentina with tons of typos per sentence that amke my posts almost unreadable:-) This is Lagarde just saying the same thing I have been saying before the news from Greece came out in 2009.

    DNA says this is bad. Is is potentially 1930s crisis stuff.

  • http://. Octavio Richetta

    Ok. I could not help it just pissed a bit of money into PSX 1220 Friday puts. I paid $6. So if I hold to experation, will make some money if market closes tomorrow under 1214.

  • barak

    Cullen, what was fedex outlook in Dec 07’? did they foresee a global recession then?

  • http://. Octavio Richetta

    B careful, buying an option that expires in a day is 100% gambling. I guess I am bored and just wanted to place a tiny bet that may pay well if I win sp that I can keep my interest in the market, since like the Blue Crest guy, I am Zero Risk these days. If I miss, my YTD, now at 8.6%, will go down by about 0.25%.

  • JJTV

    I think a much better marker would be an increase in overnight freight. The first thing companies try to cut when margins are being squeezed is the use of overnight freight. Growth in overnight box and envelope would signal recovery to me but not overall growth in packages shipped. I should also note that more people are using amazon, etc. to receive items they would have normally gone to the store for (also how many people are buying used items off amazon, etc. which is not counted as part of GDP and would not signal demand for new production). This increases the # of packages being shipped but would not coincide with increased overall demand for new goods. Retailers order fewer large boxes as more individuals opt for internet delivery, thus retailers are holding smaller stocks. In graduate school I loaded semi-trucks for Fedex, during the night shift, on a lean production line. My experience during that period was that a shift was taking place between large orders and small orders. There were more individual packages being delieverd but fewer large order packages. Imagine trying to load a semi-trailer in less than 3 hours with little packages.

  • http://. Octavio Richetta

    Chickened out again, sold at 7.90. Now the sp500 will go down 50 points tomorrow…

  • Octavio Richetta

    Do people know the FedEX idea was a HBS student paper that got a B grade? Doesn’t say much for business schools!

  • Work

    Well that’s an accessible view of the gate’s of hell. From the other link it seems IMF’s Lagarde has the core understanding, “She described the eurozone, the countries that use the euro, as a “monetary union which has not been properly been completed by an economic and fiscal union, which is currently in the works.””

  • Colin S.

    ‘If the international community doesn’t work together, “the risk from an economic point of view is that of retraction, rising protectionism, isolation,” Lagarde said. “This is exactly the description of what happened in the ‘30s and what followed is not something we are looking forward to.”…

    She described the eurozone, the countries that use the euro, as a “monetary union which has not been properly completed by an economic and fiscal union, which is currently in the works.”…

    “Because it’s a question of courage or actually facing the issues, not being in denial, accepting the truth, accepting the reality and then dealing with it,”’

    Given her position and capabilities, to what extent could she fill the leadership void Cullen has been lamenting?

  • Bond Vigilante/Willy2

    More and more folks are buying things using the internet instead of going out to a store or a shopping mall. And all those things have to be delivered. And that’s a good for FedEx. John Williams ( may be a hyper-inflationista but I trust his figures more than the government’s. And Williams sees an ongoing “”recession””. So, I still don’t buy the “”recovery”” story.