FedEx Boosts Forecast as Q1 Profits Increase

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First-quarter profit rose 3 percent for FedEx, as the world's largest air express carrier said yesterday that it raised its earnings guidance for the year.


Earnings totaled $339 million, or $1.10 per diluted share, for the first quarter, which ended Aug. 31. This is up from $330 million, or $1.08 per diluted share, a year earlier.


This year's first quarter includes a one-time, non-cash charge of $79 million to adjust the accounting for certain facility leases, mainly at FedEx Express. Excluding this charge, earnings for the quarter would have been $1.25 per diluted share, the company said.


FedEx, Memphis, TN, reported revenue of $7.71 billion, up 10 percent from $6.98 billion the previous year; operating income of $584 million, up 1 percent from $579 million; and operating margin of 7.6 percent, down from last year's 8.3 percent. FedEx said the one-time charge also reduced the company's operating margin by 0.9 percentage points.


Total combined average daily package volume at FedEx Express and FedEx Ground grew 5 percent year over year for the quarter, thanks to continued growth in international express, U.S. domestic express and ground shipments.


"Hurricane Katrina had no significant effect on first-quarter results, although the storm inflicted some damage to our facilities in the U.S. Gulf Coast region," said Alan B. Graf Jr., executive vice president and chief financial officer. "Meanwhile, our operations have resumed in most of the affected areas except for sections of New Orleans."


FedEx said it expects second-quarter earnings of $1.30 to $1.45 per diluted share and increased its earnings guidance for the year to $5.25 to $5.50 per diluted share. The capital spending forecast for fiscal 2006 remains $2.5 billion.


The earnings guidance range reflects the economic uncertainty surrounding the hurricane effects and the continued volatility of fuel prices, the company said.


"Despite uncertainty related to Katrina and other economic conditions, we remain optimistic about global trade and expect continued economic expansion in the U.S. and in the international markets," said Frederick W. Smith, chairman, president and chief executive officer.


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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