FedEx Earnings Miss Wall Street Estimates, Raises Outlook

FedExShipping company FedEx (FDX), often seen as a bellwether of the economy, reported Wednesday that net income in its fiscal 2011 second-quarter declined 18% from a year ago period, even as revenue climbed 12%. Both income and revenue missed Wall Street estimates. The company, however, raised it fiscal 2011 outlook as holiday volumes exceed expectations.

FedEx reported a net income of $289 million, or 89 cents per share, for the quarter ended November 30, down from $345 million or, $1.10 per share, in the same period last year. Excluding one-time items, FedEx earned $1.16 per, completely missing analyst estimates of $1.31 per share. FedEx also said its operating income of $469 million, also declined 18% from $571 million last year, as margins contracted to 4.9% from 6.6% the previous year.

Earnings were reduced by costs related to the combination of FedEx Freight and FedEx National LTL operations, FedEx said, including severance costs associated with personnel reductions and non-cash asset impairment charges. Reinstatement of certain employee compensation programs, and higher pension and aircraft maintenance expenses also reduced earnings.

"Solid demand for our transportation solutions, outstanding customer service from FedEx team members and a healthier global economy helped drive second-quarter revenue higher," said Chairman, President and CEO Frederick Smith.

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FedEx reported revenue of $9.63 billion, up 12% from $8.60 billion the previous year. Revenue still came in short of Wall Street expectations of $9.71 billion. FedEx International Priority average daily package volume increased 11%, led by exports from Asia. FedEx Ground average daily package volume grew 7% in the second quarter driven by increases in the business-to-business market and FedEx Home Delivery. In FedEx's freight segment, less-than-truckload average daily shipments increased 8%.

Looking ahead, Smith said, "Our yield improvement strategy is working, holiday peak season volumes are exceeding our expectations and our economic forecast for calendar 2011 has improved. Accordingly, we have increased our earnings outlook for our current fiscal year."

For the third quarter, FedEx projects earnings of 95 cents to $1.15 per share. For the full year 2011, FedEx project earnings of $5.00 to $5.30 per share, up from the company's previous estimate of $4.80 to $5.25 per share, and compared to analysts' estimate $5.21 per share.

FDX shares, which fell 2% in premarket trading, rebounded in the regular session, trading 1.6% higher by 10:00 a.m.

Also See:Court Says Most FedEx Ground Drivers Are Not Employees

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