FedEx Stays Cautious Amid Record Revenue, Earnings

Despite reporting record revenue and earnings for its fiscal fourth quarter, FedEx Corp. said yesterday that it expects 2004 to remain sluggish.

FedEx stock earned 92 cents per share for the quarter, which ended March 31, compared with 78 cents in the same period last year. Revenue was $5.83 billion, up 8 percent from $5.42 billion last year. Net income rose 19 percent to $280 million from $236 million. Operating income was $492 million, up 18 percent from $416 million.

Total average daily package volume at FedEx Express and FedEx Ground grew a combined 5 percent year over year for the quarter due to continued strong growth at Ground and in international express shipments. Revenue for FedEx Ground increased 18 percent to $880 million, while FedEx Express revenue grew 6 percent to $4.26 billion.

For the full fiscal year, FedEx reported earnings of $2.74 per diluted share, versus $2.34 per diluted share last year. Revenue was $22.5 billion, up 9 percent from $20.6 billion the previous year. Operating income was $1.47 billion, up 11 percent from $1.32 billion. Net income was $830 million, up 17 percent from $710 million.

But for fiscal 2004, FedEx expects the U.S. economy to stay sluggish in its fiscal first quarter. Year-over-year economic improvement is expected to be evident in the second half of fiscal 2004, the Memphis, TN, company said.

FedEx also said it expects increases in pension and healthcare costs in fiscal 2004, the effects of which to be realized throughout all four quarters. This stems from two recently announced FedEx programs. The first is a voluntary retirement option with an enhanced pension package to certain groups of employees 50 or older. The second program offers voluntary severance incentives to eligible employees.

Depending on employee acceptance rates, the pretax charge for these programs is estimated at $230 million to $290 million for fiscal 2004, with most of the charge incurred in the first half of the fiscal year.

Including expected costs of the early retirement and severance programs, FedEx said it expects total earnings for the next fiscal year of $2.70 to $2.90 per share. Excluding those costs, annual earnings would be $3 to $3.15 a share.

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