FedEx sees economic recovery spreading
FedEx says the global economic recovery is broadening, as Asia continues to see strong growth and the US economy gains steam.
Fred Smith, CEO of the world's second-largest package delivery company, predicted a "relatively strong" first half as major economies emerge out of the recession followed by steady economic growth in the last six months of the year.
FedEx expects US gross domestic product growth of about 3 percent this year, with growth led by the manufacturing sector, in line with the economists' expectations.
Still, Smith warned in a conference call Thursday that the housing market "could remain a problem."
The largely positive comments came after FedEx said that fiscal third-quarter profit more than doubled from a year earlier. It was the first year-over-year profit increase for the Memphis, Tenn, shipping company in five quarters.
FedEx also raised the forecast for full-year earnings - bringing it in line with Wall Street's projections -- on expectations of "a continued modest recovery in the global economy". FedEx believes the strongest growth will continue in Asia, but the US and Europe are following.
The company, considered an economic bellwether because of the variety of products it ships, said Thursday it earned $239 million, or 76 cents per share, compared with $97 million, or 31 cents per share a year earlier.
Revenue rose 7 percent to $8.70 billion. The results exceeded Wall Street expectations for earnings of 72 cents per share and revenue of $8.37 billion.
The company said results were boosted by higher shipping volume, particularly at its international express and Ground units.
Average daily volume in International Priority packages grew 18 percent, led by exports from Asia.
Average daily package volume at FedEx Ground, concentrated in the US, grew 5 percent. Better volume is a good sign for FedEx -- and in turn, the economy -- because it means consumers and businesses are shipping more goods. FedEx said most of the growth in its ground segment was due to businesses shipping more packages to other businesses. The company said consumers "remain cautious."
Cost cuts also boosted results.
But the results also show that large transportation companies like FedEx continue to battle higher fuel costs. Fuel costs in the quarter rose 27 percent to $810 million. In addition, a loss at the company's freight unit and partial reinstatement of some employee benefits the company had taken away during the recession dampened results.
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