What is FedEx Telling us About the Global Economy?

Everyone always thinks that Alcoa kicks off the earnings season, but I don’t see it that way.  The real earnings season kicks off with FedEx who usually reports well in advance of Alcoa and gives us a much more meaningful look into the state of the economy.  So what’s the global bellwether telling us?  Here are some of the key highlights from their earnings report yesterday and the conference call:

• Guidance for the full-year was in-line with expectations after last quarter’s big cut.  That could mean things are a bit more stable.  The outlook certainly isn’t deteriorating much.
• Mike Glenn said they still see growth in the global economy:

“We continue to see modest growth in the global economy with our forecast for U.S. GDP calling for 1.9% growth in calendar year ’13. For industrial production, we expect a growth rate of 2.4% in calendar year ’13. This is slightly lower than our prior forecast, primarily reflecting a lower entry point in FY ’13 due to Hurricane Sandy. Our global GDP forecast is 2.5% in calendar year ’13. And finally, I just want to emphasize that the calendar year ’13 outlook could swing either direction depending upon policy outcomes, especially with the fiscal cliff issues in the U.S. and certainly issues in Europe.”

• The European economy remains “weak”.  
• High oil prices remain a big risk to their expenses and margins.  
• Political uncertainty is not helping matters:

“the mounting uncertainty in the U.S. related to fiscal policies and their potential to impact earnings by further restraining economic growth is a concern.”

• Operating margins were down just slightly. 
• Revenues were decent at 5% year over year.   
• Total US Domestic package shipments were down -2%.  This is an improvement over the last two quarters and more consistent with the low, but not negative economic growth we’re seeing in the US at present.