FedEx 3rd quarter earnings down 2%

FedEx 3rd quarter earnings down 2% FedEx Corp. blamed a slowing economic environment, lower fuel surcharges and severe winter storms for a 2 percent drop in net income in its third quarter ended Feb. 28 to $420 million, down from $428 million in the corresponding period last year.
   The Memphis-based express delivery and supply chain services company’s operating income in the latest quarter declined 10 percent to $641 million, although revenue gained 7 percent to $8.59 billion.
   “The U.S. economy grew at a lower rate than we expected in the third quarter, and we saw continued adjustments in the automotive and housing markets,” said Frederick W. Smith, FedEx Corp.’s chairman, president and chief executive officer. “I believe, however, this represents a healthy transition for the economy as it phases into a more sustainable growth rate.”
   Operating income at FedEx Express in the quarter was down 12 percent to $391 million, from $446 million a year ago. Revenue improved 3 percent to $5.52 billion, compared to $5.34 billion. International package volumes grew 3 percent while domestic package volumes declined 2 percent.
   During the quarter, FedEx completed the acquisitions of ANC Holdings Ltd., a United Kingdom domestic express transportation company, and Prakash Air Freight Pvt. Ltd., its Indian express service company. Neither acquisition materially affected segment financial results for the quarter. FedEx Express also completed the acquisition of the express business of China’s DTW Group on March 1, and will start a China domestic express service in May.
   FedEx Ground’s quarterly operating income increased 5 percent to $196 million after a revenue gain of 12 percent to $1.52 billion. Its average daily package volume grew 9 percent year over year, due to increased commercial business and the continued strong growth in the FedEx Home Delivery service.
   FedEx Freight’s less-than-truckload shipments jumped 20 percent following the acquisition of Watkins Motor Freight (now rebranded as FedEx National LTL). Despite the volume growth, FedEx Freight’s operating income decreased 32 percent to $50 million, although revenue improved 30 percent to $1.1 billion.
   After the first nine months of its fiscal year, FedEx’s net income rose 14 percent to $1.41 billion with operating income up 8 percent to $2.26 billion and revenue improving 10 percent to $26.06 billion.
   “Long-term we continue to maintain our goal of 10 percent to 15 percent annual earnings per share growth,” said Alan B. Graf Jr., FedEx’s executive vice president and chief financial officer. “However, FedEx's earnings growth in our upcoming fiscal 2008, excluding the 2007 net impact of the new pilot contract, may be below our long-term earnings target due to slower economic growth and planned investments in our businesses.”