MEMPHIS -- FedEx Corp.'s third-quarter profit jumped more than 50 percent and beat Wall Street expectations on a mix of volume growth and lower fuel costs.
The Memphis-based package delivery company's revenue edged up but missed expectations as lower fuel surcharges and unfavorable currency exchange rates tempered the benefits of volume growth. Its forecast for the full year also was below expectations.
The company earned $580 million, or $2.01 per share, for the three months ended Feb. 28. That was up from $378 million, or $1.23 per share, a year ago. The average estimate of 14 analysts surveyed by Zacks Investment Research was for earnings of $1.88 per share.
Revenue rose slightly to $11.72 billion, missing Wall Street forecasts, with eight analysts surveyed by Zacks expecting $11.85 billion.
"We had a very successful peak season as volumes grew across all transportation segments, and our profit improvement programs are moving ahead as scheduled," Chief Executive Officer Frederick Smith said in a statement.
The company has been restructuring its largest unit, Air Express, in part by modernizing its fleet. Revenue in that unit was essentially flat because of lower fuel surcharges and currency rates, though operating results improved because of fuel costs and weather.
"What's underappreciated on FedEx is that people believe they can make a big improvement in profitability by turning Express around," Kelly Dougherty, a Macquarie Capital USA Inc. analyst in New York, said before results were announced. "If they do that ... they're going to generate a lot of free cash flow. That's not something they've done before."
Revenue in the company's ground business rose 7 percent because of growth in both business-to-business and home-delivery services. Freight-segment revenue rose 6 percent.
Looking ahead, the company narrowed its full-year outlook to between $8.80 and $8.95 per share, down from prior guidance of $8.50 to $9 per share. Analysts surveyed by FactSet expected $8.97 per share.
FedEx predicted global economic expansion of 2.8 percent for 2015, less than the company's Dec. 17 outlook for a 3 percent gain. A stronger dollar than a year earlier and higher employee bonuses are also weighing on results in the current, fourth quarter, according to the company, whose shipments of goods as diverse as financial documents, clothing and electronics make it an economic bellwether.
Shares of FedEx fell $2.41, or 1.4 percent, to close Wednesday at $173.30. Its shares are up more than 20 percent so far this year.
The stock has outperformed UPS and other industrial companies in the Standard & Poor's 500 index this year. FedEx's 1.2 percent gain this year through Tuesday topped a 10 percent drop for Atlanta-based UPS and a 0.7 percent decline for the S&P 500 industrials index.
Information for this article was contributed by The Associated Press and by Julie Johnsson and Mary Schlangenstein of Bloomberg News.
Business on 03/19/2015