FedEx Reports 11 Percent Increase in Earnings

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FedEx Corp. reported an 11 percent increase in its third-quarter earnings yesterday, resulting largely from growth in the company's ground delivery business.

FedEx, Memphis, TN, said it earned $120 million for the three months ended Feb. 28 compared with $108 million a year ago. Revenue rose to $5 billion from $4.8 billion a year ago. Operating income was $237 million, up 24 percent from $191 million a year ago.

Alan B. Graf Jr., executive vice president and chief financial officer, said strong revenue and profit growth at FedEx Ground, cost-control efforts at FedEx Express and improved productivity across its core operating companies benefited the company this quarter.

Increases in home deliveries and business with small to medium-size corporate customers also helped boost earnings, FedEx said.

For the third quarter, FedEx Ground reported revenue of $668 million, up 26 percent from last year's $529 million. Its operating income was $69 million, up 283 percent from $18 million a year ago.

FedEx Ground volume grew 21 percent year-over-year. The growth was primarily in its core business-to-business shipments, but also from the company's expanding FedEx Home Delivery operation. In February, FedEx Ground opened 31 Home Delivery facilities, expanding coverage to about 90 percent of the U.S. population. Another 47 are to open in September, reaching nearly all U.S. addresses.

FedEx Express U.S. domestic average daily package volume declined 5 percent year-over-year for the third quarter while package volume from its FedEx International Priority service was down about 2 percent.

However, helping offset package volume trends was continued strong growth in weight related to the U.S. Postal Service transportation agreement. In addition, FedEx in January began the second phase of its program to place FedEx Express drop boxes outside the most frequently visited U.S. post offices. FedEx expects to increase the number of these drop boxes by about half to more than 7,500 by May 31.

The company said that it expects fourth-quarter volume at FedEx Ground to grow about 16 percent year-over-year. Fourth-quarter year-over-year volume for FedEx Express U.S. domestic average daily package volume is expected to be down about 2 percent, and FedEx International Priority shipments are to be down about 1 percent.

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