FedEx issues cautious 3Q forecast

NEW YORK - December 17, 2009

Although the package delivery company expects a modest economic recovery next year, FedEx said "there is some uncertainty regarding the sustainability of current demand trends after our peak shipping season." The company, based in Memphis, Tenn., predicts earnings of 50 to 70 cents per share in the third quarter, well under analysts' expectations of 84 cents per share.

FedEx shares fell 3.6 percent in premarket trading.

The third quarter, which ends in January, is usually weak because it includes the typical slowdown after the holiday season. But predictions from FedEx and its larger rival UPS are considered an indicator of how the broader economy is faring. UPS reported lower third-quarter profit and revenue in October.

FedEx Corp. said it earned $345 million, or $1.10 per share, compared with $493 million, or $1.58 per share a year earlier. Revenue fell 10 percent to nearly $8.6 billion.

Thomson Reuters says analysts expected profit of $1.06 per share on revenue of $8.46 billion.

FedEx reported double-digit sales declines in major segments including Express, Freight and Services. But revenue in the company's Ground segment, in most cases the least-expensive shipping option, rose 3 percent mostly due to added volume from a partnership with the U.S. Postal Service and DHL's exit from the U.S. market.

Despite the company's cautious prediction for the third-quarter, it forecast full-year earnings mostly above what Wall Street currently expects. FedEx sees profit of between $3.45 and $3.75 per share, compared with a current average analyst estimate of $3.46. FedEx said continued cost cuts will boost results.

The company said it will resume merit salary increases in 2010 and half of the 401(k) company match for most U.S. workers. The program was suspended a year ago.

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