FedEx Corp. indicated Thursday that the global economic recovery isn't as strong as previously thought, and moved to fix the weak spot in its operations: its money-losing truck business.
FedEx did raise its financial outlook after its first-quarter net income doubled. But the projections for the second quarter and full year fell shy of Wall Street expectations, and the stock dropped 2.6 percent in premarket trading.
Growth in international air shipments has been driving FedEx's results lately. That continued in the first quarter. But the FedEx Freight segment lost money again as demand for large items like refrigerators and other appliances continues to be weak.
FedEx will combine its FedEx Freight and FedEx National less-than-truckload operations on Jan. 30, closing 100 facilities and cutting 1,700 workers. FedEx says the move, along with other cost cuts, will ensure the trucking business is profitable next year.
Less-than-truckload shippers take goods from many different manufacturers and consolidate them into a single truck for delivery.
The move suggests that big companies like FedEx, which is a bellwether for broader economic health, are feeling that the global economy still has a way to go for a full recovery.
The world's second-largest package delivery company now expects to earn between $1.15 and $1.35 per share for the quarter ending in November, below analysts' expectations of $1.36 per share.
The Memphis, Tenn., company earned $380 million, or $1.20 per share in the fiscal first-quarter that ended in August, compared with $181 million, or 58 cents per share a year ago. That's slightly under the $1.21 per share that Wall Street expected.
Revenue rose 18 percent to $9.46 billion.
FedEx shares fell $2.27, or 2.6 percent, to $83.67 in pre-market trading.
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