FedEx lowers 2013 profit view, plans air cost cuts

MEMPHIS, Tenn., Tue Sep 18, 2012 – FedEx Corp. lowered its fiscal 2013 profit target on Tuesday, saying earnings could slide as much as 6 percent for the year, as a weakening world economy prompts customers to shift toward lower-priced and slower shipping options.

The world’s second-largest package delivery company said makers of electronics and mobile phones had begun to move more of their cargo on ships as pressure on their selling prices makes the cost of air freight harder to bear.

“A lot of traffic is moving onto the water because moving goods by air is very energy-intensive,” Chief Executive Officer Fred Smith told investors on a conference call. “You can’t have jet fuel going up to close to $4 a gallon on occasion without it having a big effect on the choices people make.”

The Memphis, Tennessee-based company plans to take a “significant amount of cost” out of its express air freight operation, Smith said. It will provide details at an October investor meeting, but does not plan layoffs or “draconian steps,” he added.

Smith founded the company in 1971 as an air shipper, but today it moves a large amount of goods by truck.

FedEx said it expected a profit of $6.20 to $6.60 per share for its fiscal year, which ends in May. That is below both its prior forecast of $6.90 to $7.40 and Wall Street’s estimate of $7.03.

FedEx’s larger rival, United Parcel Service Inc., had cut its 2012 profit forecast in July, but the midpoint of the revised range would still represent roughly 9 percent growth.

FedEx’s shares fell 1.7 percent to $87.78 on the New York Stock Exchange.

Intel cuts outlook on weak PC demand; shares slump

SAN FRANCISCO, Fri Sep 7, 2012 – Intel Corp. cut its third-quarter revenue estimate more than expected on Friday due to a decline in demand for its chips as customers reduce inventories and businesses buy fewer personal computers.

Intel also said it was scaling back capital spending as a result of the business slowdown. Intel’s stock fell 3.6 percent, and shares of ASML and other companies that make chip-manufacturing equipment also lost ground.

A revision of Intel targets had been anticipated by some analysts after PC makers Hewlett Packard and Dell Inc. warned of slow demand last month, a development that has been compounded by a shaky global economy and consumers shifting toward tablets and smartphones.

But the 8 percent reduction in the top chipmaker’s revenue outlook was much more severe than expected. Intel also withdrew its full-year forecast.

The scaled-back outlook comes just days ahead of a major event where Intel will tout a new generation of processors that consume less power, central to its strategy of reinvigorating a stagnant PC industry.

Bernstein analyst Stacy Rasgon said the size of the Intel cut was surprising and was a worrying new sign that the company is seeing weakness in PC sales to businesses and governments, known as enterprise sales.

“They also have weakness in enterprise PCs in emerging markets. In the last six to eight quarters, consumers have been weak but the enterprise was strong. Now the enterprise is weak,” Rasgon said.

Target profit beats quarterly expectations; shares up

MINNEAPOLIS, Wed Aug 15, 2012 – Target Corp posted a higher-than-expected quarterly profit and raised its full-year forecast on Wednesday, as it won over shoppers with an expanded selection of food in many stores and discounts for its cardholders.

Shares of the U.S. discount chain rose 1.5 percent to $64.33 in early trading.

Target is testing new strategies, such as opening smaller city stores, as it tries to entice shoppers to visit more often. The company added a wider variety of fresh food to hundreds of stores and will sell a line of holiday goods with upscale department store Neiman Marcus Group Inc. later this year.

Target is also spending as it gets ready to open its first Canadian stores next year.

But those expenses were a bit lower than anticipated, and the results benefited from that as well as higher-than-expected profitability in the company’s credit card unit, said Janney analyst David Strasser, who has a “neutral” rating on Target stock.

Target said it was “very pleased” with the early results from its first three CityTargets, which opened in Chicago, Los Angeles and Seattle in late July. The stores are about two-thirds of the size of the company’s typical locations and carry a limited selection of some goods.

Analysts see CityTarget as a blueprint for how Target plans to run stores in Canada, where its sites are smaller than its typical U.S. shops. Target plans to start opening Canadian stores in March or April, after taking over leases for Zellers stores from Hudson’s Bay Co. in 2011.

“While the initial response from shoppers has been positive, the success of this format will essentially depend on whether Target can make the economics of the model work,” Stewart Samuel, a Vancouver, Canada-based senior analyst with food and grocery research firm IGD, said earlier this week.

Wholesale inventories data points to first quarter GDP downgrade

WASHINGTON, Wed May 9, 2012 – Stocks of unsold goods at wholesalers rose modestly in March, according to government data on Wednesday that suggested a downward revision to the initial first-quarter growth estimate.

Wholesale inventories increased 0.3 percent to a record $480.4 billion, the Commerce Department said, after an unrevised 0.9 percent rise in February.

The increase was half what economists polled by Reuters had expected, leaving them to conclude that the government would likely lower its first-quarter GDP estimate to an annual pace of 1.9 percent from the 2.2 percent rate it reported last month.

The change in inventories is a key component in the calculation of GDP. However, the actual size of the revision would be depend on data next week on overall business inventories for March.

Trade data for March to be released on Thursday will also have an impact on the first-quarter GDP estimate. The government used estimates for both business inventories and the trade balance for its first GDP estimate, published last month.

Economists said the wholesale numbers, particularly the ex-autos component that goes into the GDP calculation, had come in softer than the government’s assumptions.

Merck forecasts first-quarter EPS below Street view

WHITEHOUSE STATION, N.J. – Tue Mar 6: Merck & Co. Inc. said on Tuesday it expects first-quarter earnings per share to be between 95 and 98 cents, excluding items, below the average estimate on Wall Street of $1.01.

Including items, the drugmaker sees earnings per share between 52 cents and 60 cents.

With the euro exchange rate at about $1.31 in the first quarter, currency is expected to have a 1 to 2 percent unfavorable impact on sales in the first quarter.

The company reiterated its 2012 full-year forecast, calling for earnings per share between $3.75 and $3.85, excluding restructuring- and acquisition-related costs, and between $2.04 to $2.30 per share including those items.

Merck said it expects revenue at or near 2011 levels on a constant currency basis. But at current exchange rates, 2012 sales would be reduced by about 2 to 3 percent.