FedEx Q3 Net Income Rises 35 Percent

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FedEx Corp. posted a higher quarterly profit yesterday on a better-than-expected U.S. holiday season, strong global economic growth and price increases. The carrier also raised its full-year profit forecast.


Net income of $428 million was up 35 percent for the third quarter ended Feb. 28 from $317 million in the previous year.


Revenue increased $8 billion, up 9 percent from $7.34 billion in the previous year. Operating income climbed $713 million, up 29 percent from $552 million a year ago, and operating margin rose 8.9 percent, up from last year's 7.5 percent.


"FedEx continues to deliver strong results by providing outstanding customer service around the world and by crisply executing our strategy of balancing volume and revenue growth with cost containment to improve our margins," said Frederick W. Smith, chairman/president/CEO of FedEx Corp.


Total combined average daily package volume at FedEx Ground and FedEx Express grew 4 percent year over year for the quarter, led by improved ground and international express package growth.


FedEx expects fourth-quarter earnings of $1.65 to $1.80 per diluted share. The company's earnings guidance for the year is now $5.66 to $5.81 per diluted share compared with previous guidance of $5.45 to $5.70 per diluted share, which includes the net effect of a 15-cent-per-share lease accounting charge in the first quarter.


Excluding the effect of the lease accounting charge, earnings for the year are expected to be $5.81 to $5.96 per diluted share. The capital spending forecast for fiscal 2006 is $2.6 billion.


"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., 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."


Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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