FedEx outlook bright on growing demand

By @ibtimes on

FedEx Corp, the world's largest cargo airline, forecast improved revenue and margins in the current quarter and beyond, and sees more shipments for reconstruction in Japan.

The brightening outlook overshadowed lower earnings for the fiscal third quarter, ended February 28, which was slammed by severe winter storms and spiking oil prices, and FedEx shares rose more than 5 percent.

The No. 2 package delivery company said fourth-quarter profit should rise to a range between $1.66 to $1.83 per share, compared with the Wall Street view of $1.66 a share.

We expect continued positive yield trends to improve revenues and margins in the fourth quarter and in fiscal 2012, said Alan Graf, chief financial officer.

FedEx and United Parcel Service, the largest package delivery company, are considered economic bellwethers. FedEx handles goods equal to 4 percent of U.S. gross domestic product and 1.5 percent of global GDP. UPS ships goods equal to 6 percent of U.S. GDP and 2 percent of global GDP.

FedEx said rising oil prices that drag on the economy are a concern this year, and the near-term impact of the earthquake and tsunami in Japan is uncertain.

There will be more traffic going into Japan for reconstruction purposes and for humanitarian relief in the midst of an earthquake, tsunami and nuclear crisis, CEO Fred Smith said. There will be more.

I don't think in the scheme of things, with a company the size of FedEx at about $10 billion a quarter, that the net effect of Japan is going to be significant, he said.

Fedex shares rose 5.5 percent to $89.95 in morning trading.

The company also said the January combination of FedEx Freight and FedEx National LTL (less-than-truckload) operations likely will drive FedEx Freight's return to profitability in the fourth quarter.

TOUGH QUARTER

Winter storm disruptions and spiking oil costs hurt profit in the third quarter, but revenue topped forecasts.

Net profit fell 3 percent to $231 million, or 73 cents per share, from $239 million, or 76 cents per share, a year earlier.

Revenue for the Memphis, Tennessee-based company rose 11 percent to $9.66 billion, topping analysts' average forecast of $9.61 billion, according to Thomson Reuters I/B/E/S.

Excluding one-time items, profit was 81 cents a share, a penny short of analysts' expectations.

FedEx had cut its third-quarter profit forecast last month, to a range of 70 cents to 90 cents a share.

UPS shares rose nearly 3 percent to $72.29.

(Editing by John Wallace, Dave Zimmerman)

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