FedEx 3Q profit falls but still beats Wall Street forecasts

Staff Writer
Columbus CEO

DALLAS (AP) — FedEx Corp. reported Wednesday that its third-quarter profit fell 19 percent due to legal costs and spending on acquisitions, but revenue rose and the results beat Wall Street expectations.

The package delivery company also raised its profit forecast for its current fiscal year and its shares jumped almost 6 percent in after-hours trading.

FedEx has been riding the wave of online shopping, delivering packages to consumers who increasingly shop on computers or on their phones rather than in stores. Chairman and CEO Fred Smith said e-commerce growth led to stronger-than-expected demand for delivery services during the holiday season.

FedEx, however, appears likely to face growing competition from one of its customers. Amazon.com Inc. recently reached an agreement to lease up to 20 Boeing 767 aircraft to carry packages around the country, creating its own air-freight operation where it now uses carriers like FedEx and UPS. Amazon is already building a ground network of warehouses and delivery trucks.

In January, Amazon's chief financial officer said the traditional carriers can no longer handle all of the online retailer's peak-season shipping needs. He said that measures such as putting Amazon trucks on the road were meant to supplement the use of delivery companies but not replace them.

For the quarter ended Feb. 29, FedEx earned net income of $507 million, or $1.84 per share, down from $628 million, or $2.18 per share, a year earlier. The results were hurt by legal expenses and costs related to the pending acquisition of Dutch delivery firm TNT Express.

Excluding those costs, FedEx said it would have earned $2.51 per share. Analysts, who usually exclude non-repeating costs from their forecasts, had expected FedEx to earn $2.35 per share, according to a FactSet survey of 24 analysts and $2.33 per share by 12 analysts surveyed by Zacks Investment Research.

Revenue rose 8 percent to $12.65 billion, also topping expectations. The 17 analysts surveyed by FactSet had predicted $12.36 billion.

The Memphis, Tennessee-based company raised its forecast range for earnings during the full fiscal year that ends this spring. It predicted profit excluding special items to be between $10.70 and $10.90 per share, compared with the prior prediction of $10.40 to $10.90, and analysts' forecast of $10.55 per share.

FedEx shares closed regular trading at $144.27 after gaining $1.20. In after-hours trading following the release of the earnings report, they were up another $8.09 to $152.36.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on FDX at http://www.zacks.com/ap/FDX

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Keywords: FedEx, Earnings Report