Monday, 24 September 2007

Transports signal slowing US economy

Transport companies are usually a fair gauge of how the economy is traveling. A couple of US transports gave earnings guidance last week suggesting the US economy is definitely slowing.

Last Thursday FedEx Corp. (FDX) posted 1Q07 earnings of $1.58 a share 4% higher than the same period a year ago and ahead of analyst estimates of $1.54 a share. Not a bad result given a slowing economy however the company issued a profit warning for the second-quarter. The company now expects to earn net income of $1.60 to $1.75 a share, below the Wall Street target of $1.97 a share.

Knight Transportation Inc. (KNX) issued a profit warning last Tuesday stating that their 3Q07 results would likely come in below expectations. Knight forecast earnings for the three months ending Sept. 30 in a range of 18 cents to 21 cents a share, compared with analysts expectations of 23 cents a share. The company cited an industry-wide drop in freight and excess truckload capacity for the weaker results.

Knight's statement is particularly telling, "an industry-wide drop in freight and excess truckload capacity" quite simply it means more people moving less stuff around the country. Just another sign that the US economy is getting weaker.