FedEx executives predicted there will be a generally tougher freight environment in their next fiscal quarter in an investor conference call discussing quarter ended November 30,. They blame the decelerating economy coupled with fuel surcharges that will lag rising spot prices.
“Fuel price volatility and the resulting surcharges positively impacted [our fiscal] second quarter as prices fell faster than the surcharges due to the timing lag in setting the surcharges,” Alan Graf, FedEx executive vp and CFO. “That did benefit our second quarter. Conversely, I expect that the third quarter will be negatively impacted by this same timing issue.”
FedEx Freight, which includes its recent acquisition of LTL carrier Watkins Motor Lines which had been rebranded FedEx National LTL, saw operating income rise a relatively sluggish 2% during its last fiscal quarter.
Excluding the Watkins purchase, which is drawing integration expenses, FedEx Freight saw good growth in a softening trucking market.
“The original FedEx Freight regional LTL network continued to have growth in the quarter,” said Doug Duncan, FedEx Freight president. “Although it decelerated month by month, it was still positive growth. And in looking at the trucking indexes I see out there, it looks to me the actual trucking market is actually negative year-over-year growth. So I think we’re still gaining significant market share in the regional LTL business and we get that from a number of sources. So I’m very pleased with that, although it’s not the growth rate we had hoped it would be.”