FedEx Reports Surge in Earnings; Outlook Disappoints

By Angela Chen 

FedEx Corp. reported a 53% increase in earnings during the holiday quarter, boosted by lower fuel costs, milder weather and the shipping giant's recent restructuring moves.

FedEx shares, up 27% over the past year, slid 1.3% in premarket trading as the company's February quarter revenue as well as its earnings outlook for the current fiscal year fell short of expectations.

With more than 600 aircraft and 90,000 vehicles, FedEx has benefited from falling fuel prices. The company's restructuring of its air-express division also has helped drive higher profits. Those measures include modernizing its air fleet to improve fuel efficiency and offering buyouts to about 3,600 employees, who have since left the company.

In addition, this year's milder weather was a boon. Last year's severe winter weather shaved off $125 million from FedEx's operating income, executives said at the time.

For the third quarter ended Feb. 28, FedEx posted a profit of $580 million, or $2.01 a share, up from $378 million, or $1.23 a share, in the year-earlier period. FedEx said its stock buybacks over the past year boosted its third-quarter per-share earnings by 11 cents.

Revenue rose 4% to $11.72 billion.

Analysts polled by Thomson Reuters recently expected per-share earnings of $1.87 on revenue of $11.79 billion.

"We had a very successful peak season as volumes grew across all transportation segments," Chief Executive Frederick Smith said.

For the fiscal year ending in May, FedEx narrowed its per-share earnings range to between $8.80 and $8.95, from its previous forecast of $8.50 to $9. Analysts, on average, were expecting earnings of $8.97 a share, according to Thomson Reuters.

"Variable incentive compensation accruals will continue to increase as our financial performance improves, and we expect to deliver record fourth quarter and fiscal year earnings," said Alan B. Graf, Jr., FedEx chief financial officer.

Write to Angela Chen at [e-mail]

Access Investor Kit for FedEx Corp.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US31428X1063

Subscribe to WSJ: http://online.wsj.com?mod=djnwires