FedEx Tempers Third-Quarter Hopes
FedEx 2nd-Quarter Profits Rise 26 Percent but Says 3rd Quarter to Hit Low End of Expectations
MEMPHIS, Tenn. (AP) -- Second-quarter earnings at FedEx Corp. rose 26 percent, though shares in the package delivery company slipped Wednesday after it said third-quarter results will fall at the low end of Wall Street's expectations.
FedEx earned $245 million, or 81 cents per share, for the quarter ended Nov. 1, up from $194 million, or 67 cents per share, a year earlier, helped by growth in its home delivery business and a contract with the U.S. postal service.
A $116 million reimbursement the federal government gave the Memphis company, which operates the world's largest cargo airline, for grounding its aircraft after the Sept. 11 terrorist attacks also helped boost results.
The latest results were well above the consensus forecast for earnings of 64 cents a share by analysts surveyed by Thomson Financial/First Call.
``We had a truly outstanding quarter,'' said Alan Graf, FedEx chief financial officer.
Nonetheless, FedEx shares were down 91 cents a share, or 2 percent, at $49.89 in trading on the New York Stock Exchange after it said that third-quarter results would be at the low end of estimates due to lingering economic effects from the attacks.
Graf said the company was lowering its predictions for third-quarter earnings to between 25 cents and 35 cents per share. Analysts had been predicting 35 cents a share for the quarter that ends Feb. 2.
Along with the rest of the nation's airlines, FedEx planes were grounded for two days and international deliveries were restricted for over a week after the attacks.
Volume is expected to continue dropping for the company's FedEx Express division, which runs the airline, and growing for the ground delivery operations as customers wanting to save money turn to cheaper, slower alternatives.
``I think this is the second quarter in a row in which they beat their own guidance, so it's likely the numbers will be better than they think,'' said analyst Helane Becker of Buckingham Research Group. ``Of course a lot is contingent on how well the economy does.''
In October, the company had predicted that its second-quarter earnings, excluding the federal assistance, would range from 40 cents to 45 cents per share.
The company will be carrying more packages for the postal service after negotiating an addendum to its seven-year, $7.2 billion contract that will allow FedEx to carry more than 3.3 million pounds of mail per day for the next 10 months.
``They're picking up where the main commercial passenger airlines have left off. I think that's exactly it,'' Becker said. After Sept. 11, the airlines became more leery of carrying mail on passenger carriers, but that may change by next October.
FedEx revenues for the quarter were $5.14 billion, up 5 percent from the $4.9 billion a year ago.
For the first six months of the year, FedEx earned $354 million, or $1.17 per share, on revenues of $10.2 billion, versus $362 million, or $1.25 per share, on revenues of $9.7 billion a year ago.
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