Package delivery company FedEx Corp. said on Thursday its quarterly profit jumped 40 percent, beating expectations, on strong growth in its ground and freight segments.
FedEx, often seen as a bellwether of U.S. economic activity along with main rival United Parcel Service Inc., also raised its full-year earnings forecast and noted the global economy remains strong, with U.S. economic growth “moderate, but sustainable.”
Analysts said the results indicated the U.S. economy may not be slowing as much as investors feared.
“(FedEx’s) results are pretty solid, and there is not much sign of a slowdown here,” said Peter Smith, an analyst at Morningstar.
FedEx profit increased to $475 million, or $1.53 a share, for its 2007 fiscal first quarter ended August 31, from $339 million, or $1.10 a share, a year earlier.
Analysts, on average, expected FedEx earnings of $1.51 per share, according to Reuters Estimates.
The market watched FedEx results closely, especially after Atlanta-based UPS, the world’s largest package delivery company, reported lower-than-expected second-quarter results in July, and warned the U.S. economy could be slowing.
“(FedEx’s) results showed that UPS’ issues may have been company specific,” Morningstar’s Smith said. “They will likely be interpreted positively by the market.”
The Memphis, Tennessee-based company raised its outlook for full-year 2007 earnings to a range of $6.50 to $6.85 a share from a previous range of $6.45 to $6.80.
Analysts expected full-year earnings per share of $6.80.
FedEx said it expected second-quarter earnings between $1.45 and $1.60, while analysts looked for $1.74.
FedEx said second-quarter results will include expenses of 20 cents per share due to the proposed pilots contract.
“We remain confident in our ability to achieve solid profitable growth by taking advantage of strong international trade trends,” Chief Executive Frederick Smith said in a statement.
“The global economy is growing at a healthy pace with the U.S. economy growing at a moderate, sustainable rate,” Smith added.
Total revenue jumped to $8.54 billion from $7.71 billion.
Revenue at its ground package segment rose to $1.42 billion from $1.22 billion, while freight unit revenue increased to $1.01 billion from $892 million.
Revenue at FedEx Kinko’s copy and printing retail chain fall to $504 million from $517 million.
