FedEx’s 3rd-quarter profits up 33%

FedEx’s 3rd-quarter profits up 33%    FedEx Corp. Wednesday reported consolidated net income of $428 million for its fiscal third quarter ended Feb. 28, up 35 percent compared to $317 million a year ago.
   The Memphis-based company posted operating income of $713 million, up 29 percent from $552 million in the same period of the previous fiscal year. Revenue increased 9 percent to $8 billion from $7.34 billion.
   Revenue for FedEx Express was $5.34 billion, up 9 percent from $4.92 billion. The unit’s operating income improved 31 percent to $446 million from $340 million, with an operating margin of 8.4 percent compared to 6.9 percent in the same quarter last year.
   FedEx Express’ international sales increased 12 percent, while average daily package volume grew 10 percent “due to strong growth in Asia and Europe and continuing growth in U.S. export.” Yield was up 2 percent “due primarily to higher fuel surcharges and improved regional mix, partially offset by currency exchange rate impacts. Domestic package yield grew 8 percent with a 3 percent rise in daily package volume. “The increase in U.S. domestic revenue per package was mainly driven by higher fuel surcharges, the January 2006 price increases and yield management actions,” FedEx said.
   FedEx Ground’s operating income increased 26 percent to $187 million from $149 million. Revenue rose 14 percent to $1.36 billion from $1.2 billion.
   FedEx Ground’s average daily package volume improved 11 percent. Yield improved 4 percent primarily due to the reintroduction of a fuel surcharge, higher extra service revenue and the impact of the January general rate increase.
   Operating income at FedEx Freight jumped 35 percent to $73 million, compared to $54 million in the comparable year-earlier period. Revenue was $848 million, up 14 percent from the $747 million posted in the same quarter last year. The company achieved an operating margin of 8.6 percent compared to 7.2 percent in the previous year period. Average daily shipment volume increased 7 percent. The less-than-truckload carrier improved yield 7 percent “reflecting incremental fuel surcharges and higher rates.”
   “Earnings for our third quarter were better than forecasted due to a stronger than expected holiday peak season for FedEx Ground, improved productivity in our transportation segments, lower than expected fuel costs, deferral of advertising and promotion costs to the fourth quarter and a lower effective tax rate,” said Alan B. Graf Jr., FedEx’s executive vice president and chief financial officer. “Our earnings guidance for the fourth quarter, which assumes continued economic growth, reflects a more normal expense trend.”
   The company’s earnings guidance for the year is now $5.66 to $5.81 per diluted share, compared to a previous guidance of $5.45 to $5.70 per diluted share, which includes the net effect of a 15-cents-per-share lease accounting charge in the first quarter.
   FedEx has set a $2.6 billion capital spending budget for its fiscal year 2006.