Released: Thursday, June 19, 2008
The Conference Board announced today that the U.S. leading index increased 0.1 percent, the coincident index increased 0.1 percent and the lagging index increased 0.2 percent in May.
The leading index increased slightly in May, following a small increase in April. The interest rate spread and stock prices continued to make large positive contributions to the index, more than offsetting May's declines in real money supply, consumer expectations, and building permits. In May, the six-month rate of decline in the leading index slowed to -0.7 percent (a -1.4 percent annual rate), from -2.4 percent (a -4.7 percent annual rate) in the six-month period through January. However, the weaknesses among the leading indicators have remained fairly widespread in recent months.
The coincident index also increased slightly in May, the first increase in seven months, and the index was revised down modestly for March and April as new component data became available. The growth rate of the coincident index stands at -0.4 percent (a -0.7 percent annual rate) in the six-month period though May, down from 0.3 percent (a 0.6 percent annual rate) from July 2007 to January 2008, and the weaknesses among its components have remained widespread in recent months. The lagging index increased this month, and the coincident to lagging ratio has continued to decline.
The leading index has risen in the past two months, following a steady decline that began in the middle of last year. However, the number of components that are falling continues to be greater than the number of components that are rising over the past six months. Meanwhile, the coincident index has decreased modestly in recent months, after rising steadily for the most part of 2006 and through late 2007. Real GDP expanded at an average annual rate of 0.7 percent for the first quarter of 2008 and the fourth quarter of 2007, down from an average annual rate of 4.4 percent for the previous two quarters. Taken together, the behavior of the composite indexes so far continues to suggest weak economic activity in the near term.
LEADING INDICATORS. Four of the ten indicators that make up the leading index increased in May. The positive contributors — beginning with the largest positive contributor — were the interest rate spread, stock prices, manufacturers' new orders for consumer goods and materials*, and manufacturers' new orders for nondefense capital goods*. The negative contributors — beginning with the largest negative contributor — were real money supply*, index of consumer expectations, building permits, index of supplier deliveries (vendor performance), and average weekly initial claims for unemployment insurance (inverted). Average weekly manufacturing hours held steady in May.
The leading index now stands at 102.1 (2004=100). Based on revised data, this index increased 0.1 percent in April and remained unchanged in March. During the six-month span through May, the leading index decreased 0.7 percent, with three out of ten components advancing (diffusion index, six-month span equals 30 percent).
COINCIDENT INDICATORS. Two of the four indicators that make up the coincident index increased in May. The positive contributors to the index — beginning with the larger positive contributor — were personal income less transfer payments* and manufacturing and trade sales*. The negative contributors were industrial production and employees on nonagricultural payrolls.
The coincident index now stands at 106.8 (2004=100). This index decreased 0.1 percent in April and decreased 0.1 percent in March. During the six-month period through May, the coincident index decreased 0.4 percent.
LAGGING INDICATORS. The lagging index stands at 112.4 (2004=100) in May, with four of the seven components advancing. The positive contributors to the index — beginning with the largest positive contributor — were average duration of unemployment (inverted), change in CPI for services, ratio of manufacturing and trade inventories to sales*, and ratio of consumer installment credit to personal income*. The negative contributors — beginning with the largest negative contributor — were commercial and industrial loans outstanding*, average prime rate charged by banks, and change in labor cost per unit of output*. Based on revised data, the lagging index remained unchanged in April and increased 0.4 percent in March.
Thursday, June 19, 2008
GM Cuts Trucks And SUVs
GM Facing What Could Be Biggest Challenge Ever
Posted By:Phil LeBeau
What was shaping up to be a tough summer for GM has rapidly worsened and become a major gut-check for GM, its investors, and fans of the American automaker.
Which brings up the most frequently asked question I get from readers and viewers: can GM successfully shift gears from trucks to cars?
The good news: GM's designers, engineers, and execs have the will and ability to roll out winning cars. Look at the new Chevy Malibu, Cadillac CTS, Saturn Aura, or recent Pontiac offerings. They are every bit as good as the competition. On top of that, the cars in GM's pipeline including the Chevy Camaro should do well.
In addition, the rapid loss of market share has rattled the tree at GM. The leaders know there's no time to waste. The good news is GM is a much more nimble company and, when pressed, can move quickly to meet a challenge. This is not the mid 70's when GM was caught flat footed by the oil crisis and couldn't quickly adapt.
The bad news: shifting GM's production from trucks to cars will take time and be costly. Ask almost anyone in the auto industry and they'll tell you the domestic automakers simply do not have enough flexibility in their plants. In other words, GM can't just flip a switch and crank out fewer trucks in exchange for more cars. It will take many months to re-tool plants.
It will also be costly. The UAW will work with GM, but the union will also fight to keep jobs and get buyouts for those GM wants to release. Now, GM has plenty of liquidity at the moment, but there is a limit. GM has already sold and borrowed against many of it's major assets and the credit markets stink right now, meaning the company will find it more expensive if it needs to borrow more in the future to fund this restructuring.
My outlook: GM can get through this crisis, but it won't be pretty.
Its market share could fall much further, running the risk of dropping behind Toyota to become #2 in the U.S. That is what will make this summer so challenging for the company and its fans. GM is ending its first 100 years with a test that few could have imagined when the company was dominating the U.S. 40 or 50 years ago.
Posted By:Phil LeBeau
What was shaping up to be a tough summer for GM has rapidly worsened and become a major gut-check for GM, its investors, and fans of the American automaker.
Which brings up the most frequently asked question I get from readers and viewers: can GM successfully shift gears from trucks to cars?
The good news: GM's designers, engineers, and execs have the will and ability to roll out winning cars. Look at the new Chevy Malibu, Cadillac CTS, Saturn Aura, or recent Pontiac offerings. They are every bit as good as the competition. On top of that, the cars in GM's pipeline including the Chevy Camaro should do well.
In addition, the rapid loss of market share has rattled the tree at GM. The leaders know there's no time to waste. The good news is GM is a much more nimble company and, when pressed, can move quickly to meet a challenge. This is not the mid 70's when GM was caught flat footed by the oil crisis and couldn't quickly adapt.
The bad news: shifting GM's production from trucks to cars will take time and be costly. Ask almost anyone in the auto industry and they'll tell you the domestic automakers simply do not have enough flexibility in their plants. In other words, GM can't just flip a switch and crank out fewer trucks in exchange for more cars. It will take many months to re-tool plants.
It will also be costly. The UAW will work with GM, but the union will also fight to keep jobs and get buyouts for those GM wants to release. Now, GM has plenty of liquidity at the moment, but there is a limit. GM has already sold and borrowed against many of it's major assets and the credit markets stink right now, meaning the company will find it more expensive if it needs to borrow more in the future to fund this restructuring.
My outlook: GM can get through this crisis, but it won't be pretty.
Its market share could fall much further, running the risk of dropping behind Toyota to become #2 in the U.S. That is what will make this summer so challenging for the company and its fans. GM is ending its first 100 years with a test that few could have imagined when the company was dominating the U.S. 40 or 50 years ago.
Unemployment Claims - June 14
UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT
SEASONALLY ADJUSTED DATA In the week ending June 14, the advance figure for seasonally adjusted initial claims was 381,000, a decrease of 5,000 from the previous week's revised figure of 386,000. The 4-week moving average was 375,250, an increase of 3,250 from the previous week's revised average of 372,000.
The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending June 7, a decrease of 0.1 percentage point from the prior week's unrevised rate of 2.4 percent.
The advance number for seasonally adjusted insured unemployment during the week ending June 7 was 3,060,000, a decrease of 76,000 from the preceding week's revised level of 3,136,000. The 4-week moving average was 3,096,500, a decrease of 2,000 from the preceding week's revised average of 3,098,500.
The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 2.900 million.
SEASONALLY ADJUSTED DATA In the week ending June 14, the advance figure for seasonally adjusted initial claims was 381,000, a decrease of 5,000 from the previous week's revised figure of 386,000. The 4-week moving average was 375,250, an increase of 3,250 from the previous week's revised average of 372,000.
The advance seasonally adjusted insured unemployment rate was 2.3 percent for the week ending June 7, a decrease of 0.1 percentage point from the prior week's unrevised rate of 2.4 percent.
The advance number for seasonally adjusted insured unemployment during the week ending June 7 was 3,060,000, a decrease of 76,000 from the preceding week's revised level of 3,136,000. The 4-week moving average was 3,096,500, a decrease of 2,000 from the preceding week's revised average of 3,098,500.
The fiscal year-to-date average for seasonally adjusted insured unemployment for all programs is 2.900 million.
Bush Demands Offshore Drilling Now
By H. JOSEF HEBERT, Associated Press Writer Wed Jun 18, 6:22 PM ET
WASHINGTON - With gasoline topping $4 a gallon, President Bush urged Congress on Wednesday to lift its long-standing ban on offshore oil and gas drilling, saying the United States needs to increase its energy production. Democrats quickly rejected the idea.
"There is no excuse for delay," the president said in a statement in the Rose Garden. With the presidential election just months away, Bush made a pointed attack on Democrats, accusing them of obstructing his energy proposals and blaming them for high gasoline costs. His proposal echoed a call by Republican presidential candidate John McCain to open the Continental Shelf for exploration. "Families across the country are looking to Washington for a response," Bush said.
Congressional Democrats were quick to reject the push for lifting the drilling moratorium, saying oil companies already have 68 million acres offshore waters under lease that are not being developed.
House Speaker Nancy Pelosi called Bush's proposals "another page from (an)... energy policy that was literally written by the oil industry — give away more public resources."
Sen. Barack Obama, the Democrats' presumptive presidential nominee, rejected lifting the drilling moratorium that has been supported by a succession of presidents for nearly two decades.
"This is not something that's going to give consumers short-term relief and it is not a long-term solution to our problems with fossil fuels generally and oil in particular," said Obama. Senate Majority Leader Harry Reid, lumping Bush with McCain, accused them of staging a "cynical campaign ploy" that won't help lower energy prices.
"Despite what President Bush, John McCain and their friends in the oil industry claim, we cannot drill our way out of this problem," Reid said. "The math is simple: America has just three percent of the world's oil reserves, but Americans use a quarter of its oil."
The American people must understand that we are the only country that restricts the production of energy, be it oil, as, nuclear, coal, or alternatives. We can produce our way to lower energy prices. It's a simple law of supply and demand. The leftist Democrtas are being held hostage by the environmentalist movement. The leftists believe the law of supply and demand has been repealed but just like any other law breaker they will pay the price in the end. Unfortunately, we all will suffer. (Tim)
White House spokesman Tony Fratto retorted: "Anyone out there saying that something can be done overnight, or in a matter of months, to deal with high gasoline prices is trying to fool people. There is no tool in the toolbox out there that will lower gas prices overnight, or in weeks, or probably not even in months."
Bush said offshore drilling could yield up to 18 billion barrels of oil over time, although it would take years for production to start. Bush also said offshore drilling would take pressure off prices over time.
There are two prohibitions on offshore drilling, one imposed by Congress and another by executive order signed by Bush's father in 1990. Bush's brother, Jeb, fiercely opposed offshore drilling when he was governor of Florida. What the president now proposes would rescind his father's decision — but the president took the position that Congress has to act first and then he would follow behind.
Asked why Bush doesn't act first and lift the ban, Keith Hennessey, the director of the president's economic council, said: "He thinks that probably the most productive way to work with this Congress is to try to do it in tandem."
Before Bush spoke, the House Appropriations Committee postponed a vote it had scheduled for Wednesday on legislation doing the opposite of what the president asked — extending Congress' ban on offshore drilling. Lawmakers said they wanted to focus on a disaster relief bill for the battered Midwest.
Bush also proposed opening the Arctic National Wildlife Refuge for drilling, lifting restrictions on oil shale leasing in the Green River Basin of Colorado, Utah and Wyoming and easing the regulatory process to expand oil refining capacity.
With Americans deeply pessimistic about the economy, Bush tried to put on the onus on Congress. He acknowledged that his new proposals would take years to have a full effect, hardly the type of news that will help drivers at the gas stations now. The White House says no quick fix exists.
Still, Bush said Congress was obstructing progress — and directly contributing to consumers' pain at the pump. "I know the Democratic leaders have opposed some of these policies in the past," Bush said. "Now that their opposition has helped drive gas prices to record levels, I ask them to reconsider their positions." Bush said that if congressional leaders head home for their July 4 recess without taking action, they will need to explain why "$4 a gallon gasoline is not enough incentive for them to act. And Americans will rightly ask how high gas prices have to rise before the Democratic-controlled Congress will do something about it."
Bush said restrictions on offshore drilling have become "outdated and counterproductive."
In a nod to the environmental arguments against drilling, Bush said technology has come a long way. These days, he said, oil exploration off the coastline can be done in a way that "is out of sight, protects coral reefs and habitats, and protects against oil spills."
Congressional Democrats, joined by some GOP lawmakers from coastal states, have opposed lifting the prohibition that has barred energy companies from waters along both the East and West coasts and in the eastern Gulf of Mexico for 27 years.
On Monday, McCain made lifting the federal ban on offshore oil and gas development a key part of his energy plan. McCain said states should be allowed to pursue energy exploration in waters near their coasts and get some of the royalty revenue.
Obama retorted that the Arizona senator had flip-flopped on that issue.
WASHINGTON - With gasoline topping $4 a gallon, President Bush urged Congress on Wednesday to lift its long-standing ban on offshore oil and gas drilling, saying the United States needs to increase its energy production. Democrats quickly rejected the idea.
"There is no excuse for delay," the president said in a statement in the Rose Garden. With the presidential election just months away, Bush made a pointed attack on Democrats, accusing them of obstructing his energy proposals and blaming them for high gasoline costs. His proposal echoed a call by Republican presidential candidate John McCain to open the Continental Shelf for exploration. "Families across the country are looking to Washington for a response," Bush said.
Congressional Democrats were quick to reject the push for lifting the drilling moratorium, saying oil companies already have 68 million acres offshore waters under lease that are not being developed.
House Speaker Nancy Pelosi called Bush's proposals "another page from (an)... energy policy that was literally written by the oil industry — give away more public resources."
Sen. Barack Obama, the Democrats' presumptive presidential nominee, rejected lifting the drilling moratorium that has been supported by a succession of presidents for nearly two decades.
"This is not something that's going to give consumers short-term relief and it is not a long-term solution to our problems with fossil fuels generally and oil in particular," said Obama. Senate Majority Leader Harry Reid, lumping Bush with McCain, accused them of staging a "cynical campaign ploy" that won't help lower energy prices.
"Despite what President Bush, John McCain and their friends in the oil industry claim, we cannot drill our way out of this problem," Reid said. "The math is simple: America has just three percent of the world's oil reserves, but Americans use a quarter of its oil."
The American people must understand that we are the only country that restricts the production of energy, be it oil, as, nuclear, coal, or alternatives. We can produce our way to lower energy prices. It's a simple law of supply and demand. The leftist Democrtas are being held hostage by the environmentalist movement. The leftists believe the law of supply and demand has been repealed but just like any other law breaker they will pay the price in the end. Unfortunately, we all will suffer. (Tim)
White House spokesman Tony Fratto retorted: "Anyone out there saying that something can be done overnight, or in a matter of months, to deal with high gasoline prices is trying to fool people. There is no tool in the toolbox out there that will lower gas prices overnight, or in weeks, or probably not even in months."
Bush said offshore drilling could yield up to 18 billion barrels of oil over time, although it would take years for production to start. Bush also said offshore drilling would take pressure off prices over time.
There are two prohibitions on offshore drilling, one imposed by Congress and another by executive order signed by Bush's father in 1990. Bush's brother, Jeb, fiercely opposed offshore drilling when he was governor of Florida. What the president now proposes would rescind his father's decision — but the president took the position that Congress has to act first and then he would follow behind.
Asked why Bush doesn't act first and lift the ban, Keith Hennessey, the director of the president's economic council, said: "He thinks that probably the most productive way to work with this Congress is to try to do it in tandem."
Before Bush spoke, the House Appropriations Committee postponed a vote it had scheduled for Wednesday on legislation doing the opposite of what the president asked — extending Congress' ban on offshore drilling. Lawmakers said they wanted to focus on a disaster relief bill for the battered Midwest.
Bush also proposed opening the Arctic National Wildlife Refuge for drilling, lifting restrictions on oil shale leasing in the Green River Basin of Colorado, Utah and Wyoming and easing the regulatory process to expand oil refining capacity.
With Americans deeply pessimistic about the economy, Bush tried to put on the onus on Congress. He acknowledged that his new proposals would take years to have a full effect, hardly the type of news that will help drivers at the gas stations now. The White House says no quick fix exists.
Still, Bush said Congress was obstructing progress — and directly contributing to consumers' pain at the pump. "I know the Democratic leaders have opposed some of these policies in the past," Bush said. "Now that their opposition has helped drive gas prices to record levels, I ask them to reconsider their positions." Bush said that if congressional leaders head home for their July 4 recess without taking action, they will need to explain why "$4 a gallon gasoline is not enough incentive for them to act. And Americans will rightly ask how high gas prices have to rise before the Democratic-controlled Congress will do something about it."
Bush said restrictions on offshore drilling have become "outdated and counterproductive."
In a nod to the environmental arguments against drilling, Bush said technology has come a long way. These days, he said, oil exploration off the coastline can be done in a way that "is out of sight, protects coral reefs and habitats, and protects against oil spills."
Congressional Democrats, joined by some GOP lawmakers from coastal states, have opposed lifting the prohibition that has barred energy companies from waters along both the East and West coasts and in the eastern Gulf of Mexico for 27 years.
On Monday, McCain made lifting the federal ban on offshore oil and gas development a key part of his energy plan. McCain said states should be allowed to pursue energy exploration in waters near their coasts and get some of the royalty revenue.
Obama retorted that the Arizona senator had flip-flopped on that issue.
Boeing Wins Round #1
Boeing Statement on Tanker Protest Ruling
ST. LOUIS, June 18, 2008 -- Boeing [NYSE: BA] was informed today that the Government Accountability Office (GAO) found in Boeing's favor on a number of issues related to its protest of the U.S. Air Force's award of a $35 billion contract to supply the service with its next-generation aerial refueling aircraft -- or KC-X tankers -- to begin replacing the current fleet of KC-135 tankers.
In response to the ruling, Boeing released the following statement from Mark McGraw, vice president, Tanker Programs:
"We welcome and support today's ruling by the GAO fully sustaining the grounds of our protest.
"We appreciate the professionalism and diligence the GAO showed in its review of the KC-X acquisition process. We look forward to working with the Air Force on next steps in this critical procurement for our warfighters."
ST. LOUIS, June 18, 2008 -- Boeing [NYSE: BA] was informed today that the Government Accountability Office (GAO) found in Boeing's favor on a number of issues related to its protest of the U.S. Air Force's award of a $35 billion contract to supply the service with its next-generation aerial refueling aircraft -- or KC-X tankers -- to begin replacing the current fleet of KC-135 tankers.
In response to the ruling, Boeing released the following statement from Mark McGraw, vice president, Tanker Programs:
"We welcome and support today's ruling by the GAO fully sustaining the grounds of our protest.
"We appreciate the professionalism and diligence the GAO showed in its review of the KC-X acquisition process. We look forward to working with the Air Force on next steps in this critical procurement for our warfighters."
WASHINGTON (Reuters) - U.S. auditors urged the Air Force Wednesday to rerun its competition for a $35 billion refueling-aircraft order, upholding a protest by losing bidder Boeing Co (BA.N: Quote, Profile, Research) and breathing life into a Pentagon fiasco.
The Government Accountability Office found the Air Force made "a number of significant errors that could have affected the outcome of what was a close competition."
The contract was awarded on February 29 to a team made up of Northrop Grumman Corp (NOC.N: Quote, Profile, Research) and Europe's EADS (EAD.PA: Quote, Profile, Research), corporate parent of Boeing's passenger-jet maker rival Airbus.
GAO, a nonpartisan arm of Congress that reviews federal contract bidding disputes, faulted the Air Force for seven specific reasons, including "misleading and unequal discussions with Boeing."
The GAO's ruling is a recommendation to the Air Force, which has 60 days to respond. It was an uncommonly harsh rebuke to the service, which lists the tanker as its top acquisition priority.
Sue Payton, the Air Force's top weapons buyer, said the service was reviewing the decision and would spell out its response as soon as possible.
"The Air Force will do everything we can to rapidly move forward so America receives this urgently needed capability," she said in a statement. "The Air Force will select the best value tanker for our nation's defense, while being good stewards of the taxpayer dollar."
The GAO criticism may give Boeing another chance at what is likely to be one of the biggest contracts in Pentagon history, potentially swelling to $100 billion with follow-on orders.
The Government Accountability Office found the Air Force made "a number of significant errors that could have affected the outcome of what was a close competition."
The contract was awarded on February 29 to a team made up of Northrop Grumman Corp (NOC.N: Quote, Profile, Research) and Europe's EADS (EAD.PA: Quote, Profile, Research), corporate parent of Boeing's passenger-jet maker rival Airbus.
GAO, a nonpartisan arm of Congress that reviews federal contract bidding disputes, faulted the Air Force for seven specific reasons, including "misleading and unequal discussions with Boeing."
The GAO's ruling is a recommendation to the Air Force, which has 60 days to respond. It was an uncommonly harsh rebuke to the service, which lists the tanker as its top acquisition priority.
Sue Payton, the Air Force's top weapons buyer, said the service was reviewing the decision and would spell out its response as soon as possible.
"The Air Force will do everything we can to rapidly move forward so America receives this urgently needed capability," she said in a statement. "The Air Force will select the best value tanker for our nation's defense, while being good stewards of the taxpayer dollar."
The GAO criticism may give Boeing another chance at what is likely to be one of the biggest contracts in Pentagon history, potentially swelling to $100 billion with follow-on orders.
Wednesday, June 18, 2008
FedEx 4th Qtr 2008 Earnings
MEMPHIS, Tenn., June 18, 2008 ...
FedEx Corp. (NYSE: FDX) today reported a loss of $0.78 per diluted share for the fourth quarter ended May 31, compared to earnings of $1.96 per diluted share a year ago. The quarter's results include the previously announced charge of $891 million ($696 million, net of tax, or $2.22 per diluted share) related predominately to one-time, non-cash asset impairment charges. These charges were associated with the decision to minimize the use of the Kinko's trade name and a reduction in the value of the goodwill resulting from the Kinko's acquisition. Last year's fourth quarter included a $0.06 per diluted share net benefit from a settlement with Airbus related to the A380 aircraft order cancellation. Excluding these items, earnings were $1.45 per diluted share in the fourth quarter compared to $1.90 per diluted share a year ago.
"Record high fuel prices and the weak U.S. economy dampened volume growth and substantially affected our bottom line," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "Despite the challenging conditions, our team members continue their outstanding performance in support of our customers, as service levels and morale remain high. We will continue to reduce expenses to match volume and revenue expectations."
Fourth Quarter Results
FedEx Corp. reported the following consolidated results for the fourth quarter:
Revenue of $9.87 billion, up 8% from $9.15 billion the previous year
Operating loss of $163 million, down from income of $1.01 billion last year
Net loss of $241 million, down from last year's net income of $610 million
Total combined average daily package volume in the FedEx Express and FedEx Ground segments grew 1% year over year for the quarter, as 6% growth in FedEx International Priority® (IP) and FedEx Ground shipments were mostly offset by continued declines in U.S. domestic express shipments.
Fourth quarter operating results declined as a result of the Kinko's-related charge, as well as the continued escalation of fuel prices, and the weak U.S. economy, which limited demand for U.S. domestic express and copy and print services.
Full Year Results
FedEx Corp. reported the following consolidated results for the full year:
Revenue of $38.0 billion, up 8% from $35.2 billion the previous year
Operating income of $2.08 billion, down 37% from $3.28 billion last year
Net income of $1.13 billion, down 44% from last year's $2.02 billion
Earnings per share of $3.60, down 44% from $6.48 per share a year ago
Capital spending for fiscal 2008 was $2.9 billion. Fiscal 2007 results also included costs associated with upfront compensation and benefits under the new pilot labor contract at FedEx Express, which reduced second quarter earnings by approximately $0.25 per diluted share. Excluding the above items, earnings were $5.83 per diluted share for the year compared to $6.67 per diluted share a year ago.
Outlook
Earnings are difficult to predict in light of very volatile and high fuel prices and an uncertain economic outlook. FedEx projects earnings to be $0.80 to $1.00 per diluted share in the first quarter. This is in contrast to $1.58 per diluted share a year ago when crude oil averaged about $70 per barrel and the U.S. economy was stronger. The company is currently targeting fiscal 2009 earnings of $4.75 to $5.25 per diluted share. This guidance incorporates the current high fuel prices and the related impact on fuel surcharges, which are reducing demand for FedEx services and impacting yield across the company's transportation segments. This outlook assumes no additional increases to current fuel prices and no further weakening in the economy.
"The operating environment for fiscal 2009 is expected to be very difficult due to the weak U.S. economy and extremely high fuel prices," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "However, we will focus on reducing expenses and remaining cash flow positive, and will continue to take positive steps to improve the customer experience across our portfolio of services."
The capital spending forecast for the year is less than $3 billion, which includes significant investments in more fuel-efficient aircraft.
FedEx Corp. (NYSE: FDX) today reported a loss of $0.78 per diluted share for the fourth quarter ended May 31, compared to earnings of $1.96 per diluted share a year ago. The quarter's results include the previously announced charge of $891 million ($696 million, net of tax, or $2.22 per diluted share) related predominately to one-time, non-cash asset impairment charges. These charges were associated with the decision to minimize the use of the Kinko's trade name and a reduction in the value of the goodwill resulting from the Kinko's acquisition. Last year's fourth quarter included a $0.06 per diluted share net benefit from a settlement with Airbus related to the A380 aircraft order cancellation. Excluding these items, earnings were $1.45 per diluted share in the fourth quarter compared to $1.90 per diluted share a year ago.
"Record high fuel prices and the weak U.S. economy dampened volume growth and substantially affected our bottom line," said Frederick W. Smith, FedEx Corp. chairman, president and chief executive officer. "Despite the challenging conditions, our team members continue their outstanding performance in support of our customers, as service levels and morale remain high. We will continue to reduce expenses to match volume and revenue expectations."
Fourth Quarter Results
FedEx Corp. reported the following consolidated results for the fourth quarter:
Revenue of $9.87 billion, up 8% from $9.15 billion the previous year
Operating loss of $163 million, down from income of $1.01 billion last year
Net loss of $241 million, down from last year's net income of $610 million
Total combined average daily package volume in the FedEx Express and FedEx Ground segments grew 1% year over year for the quarter, as 6% growth in FedEx International Priority® (IP) and FedEx Ground shipments were mostly offset by continued declines in U.S. domestic express shipments.
Fourth quarter operating results declined as a result of the Kinko's-related charge, as well as the continued escalation of fuel prices, and the weak U.S. economy, which limited demand for U.S. domestic express and copy and print services.
Full Year Results
FedEx Corp. reported the following consolidated results for the full year:
Revenue of $38.0 billion, up 8% from $35.2 billion the previous year
Operating income of $2.08 billion, down 37% from $3.28 billion last year
Net income of $1.13 billion, down 44% from last year's $2.02 billion
Earnings per share of $3.60, down 44% from $6.48 per share a year ago
Capital spending for fiscal 2008 was $2.9 billion. Fiscal 2007 results also included costs associated with upfront compensation and benefits under the new pilot labor contract at FedEx Express, which reduced second quarter earnings by approximately $0.25 per diluted share. Excluding the above items, earnings were $5.83 per diluted share for the year compared to $6.67 per diluted share a year ago.
Outlook
Earnings are difficult to predict in light of very volatile and high fuel prices and an uncertain economic outlook. FedEx projects earnings to be $0.80 to $1.00 per diluted share in the first quarter. This is in contrast to $1.58 per diluted share a year ago when crude oil averaged about $70 per barrel and the U.S. economy was stronger. The company is currently targeting fiscal 2009 earnings of $4.75 to $5.25 per diluted share. This guidance incorporates the current high fuel prices and the related impact on fuel surcharges, which are reducing demand for FedEx services and impacting yield across the company's transportation segments. This outlook assumes no additional increases to current fuel prices and no further weakening in the economy.
"The operating environment for fiscal 2009 is expected to be very difficult due to the weak U.S. economy and extremely high fuel prices," said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. "However, we will focus on reducing expenses and remaining cash flow positive, and will continue to take positive steps to improve the customer experience across our portfolio of services."
The capital spending forecast for the year is less than $3 billion, which includes significant investments in more fuel-efficient aircraft.
Energy 101 - Big Oil
For those of you who still proclaim that "big" oil sets crude oil, gasoline, and other energy prices take a look at exactly who is "big" oil. It's not Exxon, BP, or Chevron. The largest oil and gas companies are national oil companies like National Iranian Oil Company (#1) in total reserves, followed closely by Saudi Arabian Oil Company (#2). Only three free enterprise companies crack the top 20. Exxon at #17, BP at #18, and Chevron at #20.
Of the top 20 oil companies Exxon, BP, and Chevron control just 2.3% of total oil and gas reserves. It is therefore impossible for companies such as Exxon to control or manipulate energy prices.
You and I have some control over energy prices by two methods. Since energy prices are driven primarily by supply and demand we need to conserve (drive less, more fuel efficient cars, etc) and demand that our representatives pass measures to increase supply (off shore drilling, ANWR drilling, nuclear power, clean coal technology, wind&solar power).
Until we take control we have little reason to complain. We have met the enemy and he is us.(Tim)
Of the top 20 oil companies Exxon, BP, and Chevron control just 2.3% of total oil and gas reserves. It is therefore impossible for companies such as Exxon to control or manipulate energy prices.
You and I have some control over energy prices by two methods. Since energy prices are driven primarily by supply and demand we need to conserve (drive less, more fuel efficient cars, etc) and demand that our representatives pass measures to increase supply (off shore drilling, ANWR drilling, nuclear power, clean coal technology, wind&solar power).
Until we take control we have little reason to complain. We have met the enemy and he is us.(Tim)
PPI Defined
A family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time. PPIs measure price change from the perspective of the seller.
The PPI looks at three areas of production: industry-based, commodity-based, and stage-of-processing-based companies.
The PPI looks at three areas of production: industry-based, commodity-based, and stage-of-processing-based companies.
Industrial Production Defined
An economic indicator that is released monthly by the Federal Reserve Board. The indicator measures the amount of output from the manufacturing, mining, electric and gas industries. The reference year for the index is 2002 and a level of 100.
Production data is often received directly from the Bureau of Labor Statistics and trade associations, both on physical output and inputs used in the production process. Each individual index is calculated using the Fischer index formula.Investors can use the IPI of various industries to examine the growth in the respective industry. If the IPI is growing month-over-month for a particular industry, this is a sign that the companies in the industry are performing well.
Production data is often received directly from the Bureau of Labor Statistics and trade associations, both on physical output and inputs used in the production process. Each individual index is calculated using the Fischer index formula.Investors can use the IPI of various industries to examine the growth in the respective industry. If the IPI is growing month-over-month for a particular industry, this is a sign that the companies in the industry are performing well.
Industrial Production And Capacity
Industrial production declined 0.2 percent in May after having fallen 0.7 percent in April. Manufacturing output was unchanged in May, the output of utilities shrank 1.8 percent, and the output at mines rose 0.1 percent. Factory output was boosted by a small pickup in the index for motor vehicles and parts. The end in late May of the strike at a parts producer had little effect on vehicle output for the month; the output of motor vehicles and parts remained about 10 percent below its February level. Excluding motor vehicles and parts, manufacturing production edged down 0.1 percent after having decreased 0.5 percent in April. At 110.9 percent of its 2002 average, overall industrial production was 0.1 percent below its year-earlier level. The rate of capacity utilization for total industry declined 0.2 percentage point, to 79.4 percent, a level 1.6 percentage points below its average for 1972-2007.
Market Groups
The production of consumer goods decreased 0.2 percent in May. The output of consumer durables rose 0.6 percent but was more than offset by a decline of 1.3 percent in consumer energy products; the production of consumer non-energy nondurables was unchanged. The increase for durable consumer goods reflected gains in both automotive products and home electronics. The indexes for appliances, furniture, and carpeting and for miscellaneous goods both fell. Among consumer non-energy nondurables, increased output of chemical products and miscellaneous nondurables offset declines elsewhere.
The output of business equipment was unchanged in May. The index for transit equipment decreased 0.4 percent. Higher production of autos and light trucks was outweighed by lower production of medium and heavy trucks and truck trailers. Although the index for information processing equipment moved up further in May, the increase for this category was the smallest since January 2007. The output of industrial and other equipment was unchanged; decreases among many of the components in this category were offset by production increases for farm and construction machinery, which moved up slightly after having dropped substantially in April.
The production of defense and space equipment fell 0.5 percent in May and has fallen more than 1 percent so far this year. Among nonindustrial supplies, the output of business supplies decreased 0.3 percent, and the output of construction supplies edged down 0.1 percent and has fallen for 10 consecutive months.
Materials output declined 0.2 percent; durable and energy materials both posted losses, while the index for nondurable materials registered a modest gain. Within durables, the output of consumer parts fell 0.8 percent after having fallen about 2 percent in each of the previous two months; reductions in the output of motor vehicle parts have contributed in large measure to the weakness in this index in recent months. The production of equipment parts edged up, and the production of other durable materials moved down. Among nondurable materials, the indexes for both chemical and textile materials rose, while the index for paper materials decreased. The production of energy materials declined 0.7 percent.
Market Groups
The production of consumer goods decreased 0.2 percent in May. The output of consumer durables rose 0.6 percent but was more than offset by a decline of 1.3 percent in consumer energy products; the production of consumer non-energy nondurables was unchanged. The increase for durable consumer goods reflected gains in both automotive products and home electronics. The indexes for appliances, furniture, and carpeting and for miscellaneous goods both fell. Among consumer non-energy nondurables, increased output of chemical products and miscellaneous nondurables offset declines elsewhere.
The output of business equipment was unchanged in May. The index for transit equipment decreased 0.4 percent. Higher production of autos and light trucks was outweighed by lower production of medium and heavy trucks and truck trailers. Although the index for information processing equipment moved up further in May, the increase for this category was the smallest since January 2007. The output of industrial and other equipment was unchanged; decreases among many of the components in this category were offset by production increases for farm and construction machinery, which moved up slightly after having dropped substantially in April.
The production of defense and space equipment fell 0.5 percent in May and has fallen more than 1 percent so far this year. Among nonindustrial supplies, the output of business supplies decreased 0.3 percent, and the output of construction supplies edged down 0.1 percent and has fallen for 10 consecutive months.
Materials output declined 0.2 percent; durable and energy materials both posted losses, while the index for nondurable materials registered a modest gain. Within durables, the output of consumer parts fell 0.8 percent after having fallen about 2 percent in each of the previous two months; reductions in the output of motor vehicle parts have contributed in large measure to the weakness in this index in recent months. The production of equipment parts edged up, and the production of other durable materials moved down. Among nondurable materials, the indexes for both chemical and textile materials rose, while the index for paper materials decreased. The production of energy materials declined 0.7 percent.
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