Fedex grows in Q1, but predicts a more difficult Q2

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FedEx Corp. reported its first quarter revenue was up 8 percent to $9.20 billion, up from $8.55 billion the previous year.

Its operating income of $814 million was up 4 percent from $784 million a year ago. The carrier's operating margin of 8.8 percent was down from 9.2 percent the year before. In addition, the company's net income of $494 million is up 4 percent from last year's $475 million.

"FedEx increased its revenue and earnings against the backdrop of a sluggish US economy," said Frederick W. Smith, FedEx Corp. chairman, president and CEO in a presentation with analysts. "Outside of the United States, the economy is generally solid, contributing to the growth in our international express shipments. I continue to believe that FedEx will, over the long-term, reap the rewards of our strategy of investing in key growth markets and strengthening and expanding our worldwide"

Although the company experienced a good quarter, it does not expect the same good fortune in the future as the housing slowdown is affecting shipments. Fuel costs are also negatively contributing.

"While the US economy is growing at a moderate pace, recent financial market volatility and high energy costs have increased the uncertainty surrounding the near-term economic outlook, and weakness in the housing sector continues," said Alan B. Graf, Jr., FedEx Corp executive vice president and CEO in a presentation with analysts. "As a result of this weaker than anticipated economic environment, particularly its impact on the LTL freight market, we have reduced our earnings forecast by four percent for the full year."

FedEx expects second-quarter earnings of $1.60 to $1.75 a share. The company's forecast is below analysts' average estimate of $1.97 a share.

For the entire year, FedEx reduced its outlook to $6.70 to $7.10 a share, from $7 to $7.40 a share.

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