FedEx 2Q profit up, 3Q view disappoints

Express package delivery company FedEx Corp. on Wednesday said its fiscal second-quarter profit rose 9 percent on strong results from its ground delivery business.

But the company also issued a third-quarter forecast that was below both the previous year's results and analysts' expectations, and the company's shares fell almost 4 percent to $109.70 in premarket trading

Earnings for the quarter ended Nov. 30 increased to $511 million, or $1.64 per share, from $471 million, or $1.53 per share, during the corresponding period last year.

The results included costs associated with a new labor contract for its pilots that totaled about 25 cents per share. Excluding the item, the company said it earned $1.89 per share in the period.

Analysts polled by Thomson Financial forecast a profit of $1.76 per share. The Thomson estimates excludes 20 cents per share related to upfront pilot compensation.

Revenue was up 10 percent to $8.93 billion from $8.09 billion during the year-ago period. Analysts expected revenue of $8.91 billion.

Chief Financial Officer Alan B. Graf Jr. said in a statement that second-quarter earnings were better than forecast because of lower-than-expected fuel prices, strong growth at FedEx Ground and insurance proceeds from Hurricane Katrina.

Revenue from its ground delivery business rose 16 percent to $1.52 billion.

Looking ahead, the company said it now expects adjusted full-year profit to range between $6.60 to $6.90 per share. The company said in September that it expected adjusted earnings of $6.50 to $6.85 per share.

FedEx forecast profit of $1.20 to $1.35 per share for the third quarter, down from $1.38 per share in last year's third quarter, and between $1.98 and $2.13 per share in the fourth quarter.

Analysts now expect a profit in the fiscal year of $6.82 per share, third-quarter earnings of $1.55 per share and fourth-quarter earnings of $1.98 per share.

Graf said the company's third-quarter guidance is suffering a tough comparison to last year's results because FedEx's December 2005 fuel surcharges were set after prices had spiked following Hurricane Katrina.