Package delivery company FedEx Corp. said on Tuesday a June cyber attack on its Dutch unit slashed $300 million from its quarterly profit, and the company lowered its full-year earnings forecast.
The company said the cyber attack slashed 79 cents per share from its profit – nearly 40 times the 2-cents-a-share impact from deadly Hurricane Harvey, which brought catastrophic flooding to southeastern Texas.
FedEx joins a string of companies that reported big drops in earnings because of the NotPetya virus, which hit on June 29, crippling Ukraine businesses before spreading worldwide to shut down shipping ports, factories and corporate offices.
“The impact of the cyberattack on TNT Express and lower-than-expected results at FedEx Ground reduced our first-quarter earnings,” said FedEx Chief Financial Officer Alan Graf. “We are currently executing plans to mitigate the full-year impact of these issues.”
Shares of the Memphis, Tennessee-based company, often considered a bellwether for the U.S. economy as are those of rival United Parcel Service Inc, dipped more than 2 percent in after-hours trading.
FedEx reported net income for its fiscal first quarter ended Aug. 31 of $596 million or $2.19 per share, down more than 16 percent from year-ago $715 million or $2.65 per share.
Excluding one-time items, the company reported earnings per share of $2.51. Wall Street analysts had expected earnings per share of $3.09.
Excluding the impact of the cyber attack and Hurricane Harvey, FedEx said it would have posted EPS of $3.32, above analysts’ expectations.
Most services of the Dutch TNT Express unit resumed during the quarter and systems had been restored, but TNT Express volume, revenue and profit remained below pre-attack levels, the company said.
FedEx did not have insurance protections in place that covered the cyber attack’s impact and said the attack had caused the company to re-examine the cyber insurance market.
“We are re-examining where the market is. We think it’s getting deeper and we are going to go out and see if there is something that we can develop that would add protection for our company at a reasonable price,” Graf told investors on a conference call after the company reported earnings.
FedEx said higher shipping rates across its operating units were more than offset by the cyber attack, costs related to the integration of its TNT unit, which it acquired last year for $4.8 billion, higher costs at its FedEx Ground unit, and a higher tax rate.
The company’s operating margin fell to 7.3 percent from 8.6 percent.
FedEx lowered its forecast for fiscal 2018 earnings per diluted share to a range of $11.05 to $11.85, from a previous range of $12.45 to $13.25. Analysts forecast earnings of $13.01 a share for the full year.
Overall revenue rose to $15.3 billion from $14.7 billion in the year-ago period. Analysts had expected 15.35 billion.
FedEx said on Monday it would increase its Express, Ground and Home Delivery shipping rates by an average of 4.9 percent on Jan. 1.
(Reporting by Eric M. Johnson in Seattle; Additional reporting by Nick Carey in Detroit and Jim Finkle in Toronto; Editing by Joe White and Peter Cooney)
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