FedEx says third quarter earnings may beat expectations

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Posted 12:36PM on Monday, February 11, 2002

MEMPHIS, Tenn. - FedEx Corp., the world's largest cargo airline, said Monday that earnings for the third quarter may beat expectations in part because of increased use of its cheaper ground delivery services in the weakened economy. Memphis-based FedEx had predicted earnings for the quarter that ends Feb. 28 to range between 25 cents per share and 35 cents per share, but the company now expects to be at the top of that range or "slightly in excess" of it. Analysts surveyed by Thomson Financial/First Call had been forecasting earnings of 34 cents a share. The company also reaffirmed its fourth-quarter earnings guidance of between 70 cents per share and 80 cents a share, with analysts predicting 75 cents a share. FedEx may be benefiting from a diversion of freight from United Parcel Service, as the Atlanta-based nation's largest package delivery service continues contract negotiations with the Teamsters union, according to analyst Ed Wolfe of Bear Stearns. He and FedEx chief financial officer Alan Graf Jr. also said that the rollout of the company's home delivery service, which is expected to reach 90 percent of the U.S. population by the end of the month, is helping. "Strong revenue and profit growth at FedEx Ground and continued focus on costs at FedEx Express (the air delivery service) will improve our profitability this quarter," Graf said. FedEx ground package volume growth is expected to approach 20 percent in the third quarter, compared to the 16 percent predicted earlier. The more expensive air delivery service continues to be affected by the economy's weakness, particularly in the wake of the Sept. 11 attacks, but that is being offset in part by the company's contract with the U.S. Postal Service. Shares of FedEx stock were up 82 cents, or 1.5 percent, at $54.22 a share at midday Monday on the New York Stock Exchange.