Is FedEx's good news a sign the economy has turned?

FedEx Corp. (FDX), which in the last eight months has laid off workers and raised rates, boosted its guidance Tuesday for its fiscal second quarter profit. The move underscores a growing optimism that the economy is improving, albeit at a painfully slow pace.

The Memphis-based shipper expects to report earnings of $1.10 per share for the second quarter ended November 30, down 30% from $1.58 per share a year ago. The company's previous guidance for the quarter was 65 cents to 95 cents per share. FedEx's results surpassed the 86-cent average of analysts compiled by Bloomberg. Final earnings are scheduled to be issued December 17.
Year-over-year growth in U.S. overnight express and international priority services, along with cost cutting, helped bolster the company's bottom line, said Chief Executive Alan B. Graf Jr. in a press release. "Demand for our international services has improved significantly since the first quarter, particularly in Asia and Latin America," he said.

The FedEx upside surprise is a particularly good sign for the economy because, unlike many other companies, it was not solely the result of cost cutting. Shares of the company soared after the announcement was issued late yesterday and probably will rise again today with the rest of the market.

In a speech yesterday before the Economic Club of Washington, Federal Reserve Chairman Ben Bernanke said, "We still have some ways to go before we can be assured that the recovery will be self-sustaining,"

But even the most cockeyed of optimists admit that a stiff headwind could send the economy into a tailspin again. Though unemployment dipped slightly in November from its nearly 27-year high, it has the potential to creep back up during the early part of 2010. Retail hiring in November climbed ahead of the holiday shopping season. Economic confidence, though, remains weak, with holiday spending down 21 percent over last year.

Good news from one company does not make a trend, but it certainly welcome nonetheless.
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