FedEx 1Q Profit Fell 53%; US Volume Edges Higher

   DOW JONES NEWSWIRES 
 

FedEx Corp.'s (FDX) fiscal first-quarter earnings slumped 53% as smaller shipments and lower fuel surcharges hurt revenue, but U.S. volume rose slightly.

The package-delivery company last week sharply raised its profit target for the quarter and expressed optimism for the current period amid anticipation of "a continued modest recovery in the global economy."

A number of top U.S. land-based transporters also have reported signs of improving volume in recent weeks, though levels remain sharply lower than 2008.

FedEx, an economic bellwether, has cut jobs and reduced capacity at its express and freight segments to reflect reduced demand. But it recently expanded some international economy shipping services, partly to capture sales from companies aiming to reduce costs.

Chief Financial Officer Alan B. Graf Jr. said Thursday that "While we see signs of improvement in the economy, the year-over-year comparisons will remain very difficult for our second quarter" and the company will stay focused on cost controls.

The company said it will increase shipping rates by an average 5.9% for U.S. domestic and export services starting Jan. 4., but the increase will partly be offset by lower fuel surcharges.

For the period ended Aug. 31, FedEx reported a profit of $181 million, or 58 cents a share, down from $384 million, or $1.23 a share, a year earlier. Last week's raised profit estimate was 58 cents a share, reflecting better-than-expected international-priority shipping services results.

Revenue decreased 20% to $8.01 billion. Analysts polled by Thomson Reuters most recently expected $8.24 billion.

Operating margin fell to 3.9% from 6.3%.

At its FedEx Express business, revenue fell 23% and earnings were off 70%. U.S. domestic package revenue dropped 22%, as revenue per package declined amid lower fuel surcharge revenue, though package volume grew slightly. The results were partly offset by gains from DHL's exit from the U.S. domestic package market and lower expenses due to cost cutting and fewer flight hours.

Shares were down 0.9% premarket at $77.40.

-By Tess Stynes, Dow Jones Newswires; 212-416-2481; [e-mail]