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FedEx posts jump in per share earnings
3/17/2005, 4:34 p.m. ET
By WOODY BAIRD
The Associated Press

MEMPHIS, Tenn. (AP) — The FedEx Corp., parent of the world's largest cargo airline, posted third quarter earnings per share of $1.03 Thursday, a 51 percent increase from a year ago that bested Wall Street's expectations.

For the three months ending Feb. 28, the company earned $317 million, up from $207 million, or 68 cents per share, for the same period last year.

Revenues were $7.34 billion, a 21 percent increase from $6.06 billion.

Analysts surveyed by Thomson First Call had forecast per-share earnings of 98 cents.

FedEx shares fell 9 cents to close at $96.84. The stock has traded between $68.75 and $101.55 over the past 52 weeks.

The increased earnings were due largely to a continued growth in International Priority shipments and ground deliveries, FedEx said. The company also reported a 9 percent rise in revenue on domestic express shipments with an average daily volume increase of 6 percent.

"We have solid momentum in the business and customer demand is strong," Frederick W. Smith, the shipping giant's chief executive, said in a statement. "Economic conditions remain favorable, and we are optimistic about future growth prospects."

Noting rising fuel costs, FedEx predicted it would earn between $1.40 and $1.50 per share for the fourth quarter, which ends May 31. Thomson First Call analysts are projecting $1.49 per share.

Ken Hoexter of Merrill Lynch predicted FedEx earnings of $1.51 for the fourth quarter and said investors may pause at FedEx's modest outlook. But he predicted FedEx should be able to cover most of the increased costs with fuel surcharges.

"FedEx likes to be a bit conservative, and this is part of that," he said.

Alan Graf, FedEx's chief financial officer, noted in a phone call with market analysts that a lag between rising fuel costs and implementation of surcharges can run four to six weeks.

FedEx Ground, the company's trucking division, reported a volume growth of 16 percent, which means it is increasing its market share, Hoexter said.

Third-quarter revenues included $499 million from FedEx Kinko's, which the company acquired in February 2004.

With Kinko's, Hoexter said, FedEx has access to more customers interested in shipping with FedEx Ground.

Graf said FedEx is still working on bringing Kinko's to full speed "as we continue to invest in rebranding, training and other costs."